The Chancellor of the Exchequer, George Osborne, will tonight announce measures that could stop problems at City banks "spilling onto high streets", following recommendations in last year's Vickers Report.
Banks will be forced to separate - or 'ring fence' - their investment arms and retail banking operations, despite industry lobbying efforts.
The Chancellor is expected to say that "High-street banking will be ring-fenced so that taxpayers are better protected when things go wrong. We will be able to bail in creditors when a bank fails rather than turning to the public purse."
Rules will also be announced to ensure "depositor preference" - which would mean that the money of ordinary savers would be the first priority in the event of a bank getting into trouble in the future. Mr. Osborne will say that "We've got to stop problems here in the City of London spilling onto our high streets and putting taxpayers' money at risk."
He will also emphasise that these new measures will "protect taxpayers in a way that does not make the UK uncompetitive as a home of global banks." The issue of industry competition - or "the British dilemma" as Mr. Osborne will call it - will be addressed in a number of ways. Measures will be put forward that would make it easier for customers to switch banks. The Financial Services Authority and the Bank of England will also be asked to find out what changes would be needed to encourage new entrants to come into the banking market in Britain.
These new measures will present complex challenges for the banking industry. As such, the legislation for the new rules will be put in place by the end of 2015 - but banks will have until 2019 to comply.
Hector Sants, the FSA chief executive, has warned that the government's plans could risk giving the Bank of England too much power. He said: "I think the risk is that operationally this is going to be too difficult for just one person to manage."