George Osborne
Chancellor George Osborne has been under pressure to clean up Britain\'s banking sector through tougher laws (Reuters)

Britain's top bankers will face tough annual checks under draft laws passed by a slim majority in the House of Lords.

The proposals put forward by Labour won the support of peers in the upper house and were passed by a majority of five.

The Coalition government voted against the new licensing regime, but received 217 votes against 222.

These new proposals demand higher professional standards in banking, including a yearly evaluation of an individual against "minimum thresholds of competence".

The government's view was that these fresh proposals would not noticeably improve banking standards.

Demands for higher professional standards were supported by Justin Welby, the Archbishop of Canterbury, who is also member of the Parliamentary Commission on Banking Standards; former chancellor of the exchequer Lord Nigel Lawson also backed the rules.

Chancellor George Osborne could still overturn the proposals before they become law.

The defeat for the government came after it conceded ground over whether the Bank of England (BoE) should possess more powers to control bank risk-taking.