The Government's Banking Bill - which gives the Bank of England a statutory duty to improve protections for depositors - is essential to help secure financial stability, according to a minister.

As the Bill cleared its final stage in the Commons, economic and business minister Ian Pearson said: "This is a vital piece of legislation that will enhance the ability of the authorities to secure the financial stability of the UK both now and in the future."

Both the Labour and Conservative parties have supported the Bill, which the Government is seeking to ensure becomes law by February 20 when the provisions in the legislation used to nationalise Northern Rock and Bradford and Bingley run out.

The Bill also provides new powers to deal with failing banks by transferring them more speedily to another private sector purchaser or by bringing them into temporary public ownership.

Mr Pearson, opening the third reading debate, said: "This legislation will provide the authorities with the tools they need to effectively resolve failing banks while protecting failing banks, depositors and taxpayers and minimising the disruption to the wider economy."

He added that the Bill represented "a refined and proportionate set of tools" to deal with difficulties in the economy that can affect banks and the wider economy.

Chancellor Alistair Darling signalled two additions to the Bill in his Pre-Budget Report, which will be introduced in the Lords.

Mr Pearson said that these additions would "extend the Treasury's powers" to "take bank holding companies into temporary public ownership in cases where the resolution of only the deposit taker or takers within a banking group would not by itself be sufficient to prevent a serious risk to financial stability, public funds or both".

The second change comes in the light of the experience of the administration of the Lehman Brothers' UK subsidiary and will allow second legislation to introduce "a new special insolvency procedure for investment firms that hold client assets or client money".

Shadow Treasury minister Mark Hoban said the proposed changes had "a very narrow focus" and in its current form it "doesn't take account of those institutions that are fundamental to the banking system that don't take deposits".

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