Watchdog agrees to cost new bank rules

"This will include discussion of the possible design of living wills and their implementation at both national and global level," the Financial Services Authority said.

Chancellor Alistair Darling, has said he will propose a law to force banks to draw up living wills or contingency plans to wind down quickly in times of a crisis so that the broader financial system is not destabilised.

The FSA said its discussion paper will also look at "trade offs" between raising bank capital levels to lessen the need for future government bailouts and the effect on lending ability.

Banks warn they can raise capital levels and keep lending to businesses and consumers at the same rate.

"There is a need for a comprehensive analysis of the combined impact of the different elements of regulatory reform," the FSA said.

It was commenting on responses received to its Turner review -- named after the watchdog's chairman, Adair Turner -- which made policy recommendations to apply lessons from the worst financial crisis in over 70 years.

The strongest concern raised by respondents was the need for international consistency in designing and implementing tougher rules so that London is not at a competitive disadvantage.

Turner raised hackles in London's financial district in August when he said the FSA has to be "very wary" of seeing the competitiveness of London as a major aim of UK financial policy.

"The FSA's analysis of the feedback is a rag-bag of familiar ideas about regulatory reform," says Simon Morris of law firm CMS Cameron McKenna.