The Financial Services Compensation Scheme (FSCS) currently guarantees retail deposits up to £35,000. The 100 per cent guarantee limit was upped from £2,000 amid the Northern Rock crisis last September which saw the first run on a UK bank since Victorian times.

Proposals to raise the threshold are being examined by legislators preparing the Banking Bill, which the Government will introduce this winter in a bid to improve financial stability and deposit protection arrangements.

It is being brought in alongside the Saving Gateway Bill, which aims to offer a financial incentive to saving for the poorest in society.

The Banking Bill's measures largely stem from the fallout surrounding the Northern Rock crisis, and will be the biggest shake-up to the industry for more than a decade.

The collapse and subsequent nationalisation of Northern Rock saw criticism aimed at regulatory body the Financial Services Authority (FSA), as well as the Bank of England and the Treasury.

Other proposals include plans to make it easier for savers to access money from a collapsed bank or building society. This could see pay-outs made centrally from the bank's records, rather than members of the public having individually apply through the FSCS.

Also planned is a "special resolution regime" that will come into action if a bank or other deposit taker runs into trouble.

This would make it easier for the authorities such as the Treasury and the FSA to intervene, and could see Ministers order the transfer of the bank's business to another institution if necessary. It would also speed up payouts to creditors if the bank was declared insolvent.

The Bill is also seeking to improve the information for the regulatory authorities – specifically regarding "stress testing" data applied to an institution's business model to see how it may react in turbulent economic conditions like a credit crunch.

Ministers want the FSA to be able to have all the information collected by the Bank of England, some of which the watchdog is not permitted to obtain.

Prime Minister Gordon Brown said the Bill would ensure "Britain underpins its banking system with the best protection for depositors".

It will also allow banks needing to turn to the Bank of England for temporary funding guaranteed confidentiality. The leaking of Northern Rock's funding request led to the queues outside its branches.

Proposals to extend depositor protection to the £100,000 mark would give the UK the highest guarantees of any major developed economy. Deposits in Italy are currently the safest with nearly £80,000 guaranteed, while both France and the US vouch for around £50,000 of deposits.

More than 95 per cent of accounts at Britain's banks and building societies currently hold less than £35,000.

The Bill will also seek to reduce the size of Bank of England's governing body, known as the Court of Directors. It currently comprises the Governor Mervyn King, two deputies and 16 non-executive directors.

In the Banking Bill's consultation paper issued this year the Government said a smaller board would be "more effective". It also said the chairman should be an independent director rather than the Governor, as is now.