Foreign banks are set to face tougher rules relating to their deposits in the UK, it has emerged.
The Financial Services Authority (FSA) is determined to implement a system in Britain whereby such financiers will be forced to hold capital and liquidity in separate divisions, the Financial Times reports.
Officials at the body believe this measure - which would involve overseas lenders opening locally-regulated subsidiaries with their own access to cash and capital - will prevent taxpayers and depositors from suffering should the bank collapse.
These developments echo the reforms put forward recently by the Federal Reserve in the US and both bodies are scheduled to unveil fresh rules on Monday (17 December) that will make it compulsory for financiers to make sure subsidiaries can remain open even if their parent firm goes bankrupt.
However, these plans are likely to meet resistance from some in the industry, with former US banking regulator Ernie Patrikis telling the news source that "subsidiarization would be the end of international banking".
By Tony Aynsley