Banks to oppose plans for a crisis committee

The British Bankers Association, which speaks for most of the industry, is finalising its submission to the Treasury but admitted that it will not support the idea of a committee with special emergency powers to step in if another bank gets into trouble. Darling had said he envisaged something like the Cabinet committee that meets in the event of terrorist attacks and other major emergencies, and is known as Cobra.

Instead, the BBA, headed by former Tory finance minister Angela Knight, could suggest the Financial Services Authority continues the supervision of banks and secretly label them with traffic light colours.

Banks that cause no concern would be coded green and remain regulated by the FSA. Once there were any concerns, the code would move to amber, warranting increased supervision. A red alert would mean the bank in question came under the scrutiny of the Tripartite Authority of all three bodies, which has been strongly criticised for its handling of the collapse of Northern Rock.

That saw the first run on a High Street bank in more than 140 years last summer after the former building society was forced to go to the bank of England for emergency loans which eventually soared to £27 billion. The Government was forced to nationalise the bank and take on its £100 billion of liabilities.

Darling's plans would see the Treasury taking the lead role with the FSA and Bank in supportive roles. But the BBA believes that the most important thing in preventing the collapse of any bank is rapid intervention and says it cannot see how setting up yet another committee would speed this up.