The Tripartite Authorities have also put together plans aimed at reducing the likelihood of bank failures and to reduce the impact if, nevertheless, a bank gets into difficulties. On October 8, the Government announced that it was putting in place measures to try to ensure the stability of the financial system.

First, it was announced that the BoE will ensure that the banking system has access to increased liquidity by making at least £200bn available to UK banks through the Special Liquidity Scheme. However, the provision of BoE liquidity is not the only solution to the banking crisis.

As Mervyn King, the Governor of the BoE, stated at a recent speech given at the Royal Armouries in Leeds: "Central bank liquidity is sticking-plaster, useful and important, but not a substitute for proper treatment."

The Government is, therefore, making available new capital to UK banks and building societies to strengthen their resources. It is doing this by instituting a guarantee programme (the Credit Guarantee Scheme) of approximately £250bn to "eligible" banks and building societies.

In order to be eligible, an institution must have raised, or committed to have raised, within a required timeframe, tier 1 capital (eg share capital) in the amount and in the form the Government considers appropriate.

The Government has also allocated £50bn (through the Bank Recapitalisation Fund) to act as an underwriter or capital provider of last resort to enable banks to meet the capital standard required for participation in the Credit Guarantee Scheme.

But what happens if a bank does fail?

There has been considerable focus on depositor protection in the wake of the rescue of both Northern Rock and Bradford and Bingley and the failure of the Icelandic banks and which have led to government intervention (for example, the implementation of the Landsbanki Freezing Order 2008 and Alistair Darling's confirmation that the Government is to provide £800m of compensation to people who lost money as a result of Landsbanki's failure).

The FSA announced, on October 3, that compensation limits for deposits available under the Financial Services Compensation Scheme will be increased from £35,000 to £50,000.

At the same time, the FSA published Consultation Paper 08/15 which looked at making wholesale changes to compensation limits in other financial services sectors.

In addition, the European Commission published its proposal to revise existing EU rules on deposit guarantee schemes. The key amendments proposed include increasing minimum level of cover for deposits from e20,000 to e50,000 and then to e100,000 within one year (although EU member states will be free to set higher levels in their own jurisdictions).

And on October 7, the Banking Bill received its first reading, with the second reading just one week later. The Bill includes measures which revise certain aspects of banking regulation and it puts in place a permanent Special Resolution Regime to help deal more efficiently with the consequences of a failing institution.

We all hope that the plans put in place by the Government will avert economic meltdown but it is safe to say that there will be a sea change in governance of the financial system.

As Lord Adair Turner, the chairman of the FSA, said recently, the days of soft touch regulation for banks are over.

Paul Estlin, solicitor in the Company Commercial group at the Leeds office of law firm Eversheds.