Proposals for strengthening the framework for financial stability and protecting depositors have been published by HM Treasury, the Financial Services Authority (FSA) and the Bank of England.

The proposals build on a consultation document published in January and will now be the subject of a further period of consultation, prior to the introduction of legislation in the autumn.

They focus on strengthening the stability and resilience of the financial system in the UK and internationally, and reducing the likelihood of individual banks facing difficulties, including regulatory interventions and liquidity assistance.

They are also aimed at reducing the impact if a bank gets into difficulties, providing effective compensation arrangements in which consumers have confidence and strengthening the Bank of England.

Chancellor Alistair Darling said: “No system of regulation can or should prevent the failure of each and every institution, but we must do everything possible to prevent problems which could pose a wider threat to stability.

“The challenge is to ensure that the authorities can act quickly and decisively where necessary to support financial institutions. These proposals will give the authorities the full range of powers they need.

“They do so by entrenching the model established a decade ago – the FSA responsible for individual institutions, the Bank of England for the stability of the financial system as a whole – but by providing each institution with new powers, and improving coordination between them.”

FSA chairman Callum McCarthy said: “We are working closely with the Treasury and the Bank of England to strengthen the stability and resilience of the financial system and reduce the likelihood of banks failing. This legislation is one of the most important changes of the last decade and its influence will last for decades to come.

“We will consult later this year on the supervisory aspects of the new banking resolution regime and for changes to depositor compensation and will work with our tripartite partners to implement the new arrangement effectively.”

Kevin Mountford, head of savings at Moneysupermarket, said: “While much of this announcement is good news, savers will be disappointed to hear that today marks the start of yet another round of consultation, which doesn’t even close until September.

“At this rate more than a year will have elapsed from the failure of Northern Rock before savers see further improvements to the arrangements to safe guard their hard-earned savings.”