Banks agree to new global regulations

Central banks and industry regulators have agreed to a new series of measures that aim to reduce the risk of another economic crisis.

As part of the new rules, financial institutions will have to set aside more of their profits to use in the event of a banking crisis, while limits will also be placed on the amount of debt they can get into.

The regulations, which were outlined at a meeting held by members of the Basel Committee on Banking Supervision, come after G20 officials called for financial institutions to better protect themselves against a further downturn.

President of the European Central Bank Jean-Claude Trichet described the agreements as "essential", adding: "They set the new standards for banking regulation and supervision at the global level."

Last week, French president Nicolas Sarkozy, German chancellor Angela Merkel and UK prime minister Gordon Brown said that changes to the banking system must be made in order to reduce risk.

Written by Tony Aynsley