UK 31 Jan: Prime Minister Gordon Brown's government proposed measures to allow UK authorities power to seize control and transfer accounts from failing banks to another lender.

The rules are part of a package of changes to banking regulations following the run on deposits at Northern Rock Plc in September. The proposals would "mark an important step change in the institutional, legal and insolvency arrangements," the Treasury, Bank of England and Financial Services Authority said in a joint statement in London.

The plan is part of a "special resolution regime" that aims to limit the impact of a banking crisis on the rest of the economy. It would also give the Treasury powers similar to those of US regulators to appoint an administrator and a "bridge bank" to handle the assets of financial institutions in danger of bankruptcy, the Treasury said.

"Recent months have seen a period of sustained turbulence and instability in global financial markets, with financial firms across the world affected," Chancellor of the Exchequer Alistair Darling said in a statement. "A response to these episodes requires action, not only from the UK authorities, but also from international firms and institutions."

The Treasury issued a document outlining its proposals and seeking the views of banks and lobby groups. Darling will use the responses that officials will gather during the next three months to draw up legislation to put before lawmakers.

If adopted by Parliament, the measures would mark the first steps to overhaul the law since Northern Rock tapped UK authorities for emergency loans and guarantees that now surpass 55 billion pounds.

Darling, who would prefer to sell Northern Rock to another company, has complained the government doesn't have the leverage it needs to quickly rescue struggling financial institutions.

"We do not run this company," Darling said at a hearing of the Treasury Committee on Jan 10. "We do not have all the levers at our control that we would like."

Had yesterday's proposals been in place, the government would have been able to seize and pass on the 113 billion-pound mortgage portfolio of Northern Rock to another bank, overruling the wishes of its directors or shareholders.

Darling also discussed plans to strengthen the guarantee for deposits at UK banks and to improve the so-called tripartite system of financial regulation, where authority is shared by the Treasury, Bank of England and Financial Services Authority.

Last week, an all-party panel from the House of Commons concluded that the tripartite system failed in its responsibilities to prevent a UK banking crisis.

The Treasury Committee unanimously agreed that the system of overseeing financial institutions was too slow to respond to signs of trouble at Northern Rock.