Chancellor of the Exchequer, Alistair Darling, has launched a consultation on proposals for strengthening the current framework for financial stability.
The consultation document sets out the proposed actions of the HM Treasury, the Financial Services Authority (FSA) and the Bank of England.
Detailed in five key areas, the proposals are aimed at strengthening the stability of the financial system, both in the UK and globally; reducing the likelihood of banks facing difficulties; reducing the impact if, nevertheless, a bank gets into difficulties; providing effective compensation arrangements in which consumers have confidence; and strengthening the Bank, and ensuring effective coordinated actions by authorities.
Darling said: “Recent months have seen a period of sustained turbulence and instability in global financial markets, with financial firms across the world affected.
"A response to these episodes requires action, not only from the UK authorities, but also from international firms and institutions.
“The government is determined that its response is appropriate and will therefore consult actively on these proposals, seeking discussions with financial institutions, consumer representatives and counterparts from across the world, to ensure that the final arrangements are effective.”
It is also anticipated that the Chancellor will give the FSA more powers to scrutinise the liquidity of financial institutions.
Shadow Chancellor, George Osbourne, said: “We need to improve dramatically the supervision of liquidity and make the Bank stronger and more independent.”
