If the Treasury gets its way, the City regulator will come out of the financial crisis with more enforcement powers and stronger legal backing for wielding them.

The white paper calls for new legislation that would give the Financial Services Authority explicit responsibility for financial stability. That would make it easier for the regulator to shut down or take action against a company or group of companies to address systemic risks. Currently, the FSA acts to maintain orderly markets, protect consumers and prevent financial crime.