Britain's finance ministry will have new powers to tell the Bank of England to pump money into ailing lenders if a crisis seriously threatens the country's financial stability, a new UK law outlined on Friday.
The legislation is a bid to end confusion seen during the 2008 global financial crisis over who had ultimate responsibility in Britain to take action to shore up domestic lenders.
The Treasury may only give a direction if the direction is necessary to resolve or reduce a serious threat to the stability of the financial system of the United Kingdom, according to the Financial Services Bill.
The new law, an attempt to draw a line under the regulatory failings that forced taxpayers to stump up hundreds of billions of pounds to shore up the banking sector in 2008, scraps the Financial Services Authority from 2013 and hands day-to-day supervision of banks and insurers to the Bank of England.
A major failure of the current 15-year-old tripartite system of financial regulation at the time of the 2008 financial crisis was a lack of clear lines of responsibility between the FSA, the Bank and the Treasury, which share the role.
(Reporting by Huw Jones and Fiona Shaikh)