Britain sets out plans to tighten bank regulation

Britain set out plans on Wednesday to strengthen regulation of financial markets, including making banks hold higher levels of capital and increase liquidity to prevent a re-run of the credit crunch.

Finance minister Alistair Darling also set out plans to police banking pay packages and for a new Council for Financial Stability to bring together the work of the Bank of England, Financial Services Authority and the Treasury.

Darling said he would not seek to restrict the size of banks or separate different types of banking, describing that as a "simplistic solution" that failed to take into account the complexity of today's financial system.

"Financial institutions in many countries took on too much risk. They became over-reliant on wholesale funding, too exposed to particular products. And irresponsible pay practices made banks take unnecessary risks," Darling told parliament.

"It is also clear that some financial institutions had little appreciation of what was going on inside their businesses," he added.