In the wake of the Queen's Speech, the Government has introduced the Financial Services Bill to Parliament, delivering significant reforms that will provide greater rights and information for consumers, in addition to stronger financial regulation to make banks safer and more robust in the future. Commenting on the initiative, Chancellor of the Exchequer Alistair Darling said that, from the outset of the global financial crisis two years ago, the Government has taken decisive, innovative steps to protect the savings of British families and stabilise the economy.

"Along with governments around the world, we have learned important lessons about the weaknesses of global banking. In the past too many banks failed to fully understand the risks they took. When the crisis hit, far too many firms found themselves short of capital and without any plan for managing through turbulent times," continued the Chancellor, adding: "The Bill we are introducing today is central to the Government's reform agenda that seeks to empower consumers and make sure that, in the future, taxpayers will not be called on to protect banks from the consequences of their actions."

The Bill includes:

• New powers for consumers to collectively challenge banks in court in addition to a new consumer financial education body and a free nationwide money guidance service
• A requirement for firms to develop ‘living wills' to help them better understand the risks involved in their businesses and deal with periods of stress, and to ensure they can be wound down in future crises without excessive taxpayer support
• Tougher rules on pay and bonuses that will ensure remuneration policies do not contribute to excessive risk taking
• Strengthening of the regulatory framework, including the creation of the Council for Financial Stability and enhanced powers for the Financial Services Authority.

However, lawyers claim the new power would be tantamount to handing the regulator a missile. As Mathew Rutter, a partner at law firm Beachcroft LLP said: "The power to tear up bankers' service contracts sounds dramatic, but I doubt it is something the FSA would be keen to do. It's the regulatory equivalent of Trident - it is the ultimate sanction, which is designed to strengthen the negotiating position of the FSA, rather than ever to be used. And if it were to be used, there would be lots of scope for legal challenge - and probably lots of aggrieved bankers ready to bring such a challenge."

The British Bankers' Association is particularly anxious that any such revamped powers on the part of the FSA will impede the financial sector. "British banking is a global business and many of our banks operate outside the UK," said Angela Knight, (PICTURED) chief executive of the BBA. "Moves to bind how our banks operate overseas could put the industry at a serious disadvantage and also discourage global banks from coming to the UK. This would be a major problem for the economy as well as bad for business. What we need to see is the preservation of high-quality talent and international banks operating here. The Chancellor has to have that competition focus fully in his sights," she said.