Savers' deposits are to get extra protection in the event a bank collapses, the Government has confirmed.

The details unveiled in the Queen's Speech will introduce legislation to improve the current framework for dealing with banks in "distress".

Chancellor Alistair Darling has already called for savings to be guaranteed up to £100,000, in line with a scheme run in the US.

The Government has already increased the level of savings that have a 100% guarantee from £2,000 to £35,000 under the Financial Services Compensation Scheme in the wake of the problems at Northern Rock.

It will now publish a consultation document before bringing forward legislation in the new session of Parliament.

It has also confirmed that it will use dormant money in unclaimed bank and building society accounts for community projects.

Accounts which have lain untouched for 15 years will be reinvested through the Big Lottery Fund, but consumers will still be able to reclaim their cash at a later date.

In order to do this, a fund will be set up to manage disputes which will be regulated by City watchdog the Financial Services Authority.

The raft of measures come after the governor of the Bank of England, Marvyn King, said it could be months before the full extent of the Northern Rock crisis are revealed.

Panic at the lender during the summer sparked the first run on a bank for 150 years as anxious savers queued for hours in order to get their hands on their money.

But Mr King believes the British banking system has survived the trauma.

In an interview with BBC Radio's File On 4, he said: "The British banking system has not collapsed, it has come through.

"And we will come out of this with new legislation which will give the regulators an opportunity to intervene pre-emptively - earlier than we were able to on this occasion, with better deposit insurance arrangements and with a better focus in the future on the regulation and management of liquidity.

"Most people expect that we have several more months to get through before the banks have revealed all the losses which have occurred, have taken measures to finance their obligations that result from that.

"But we are going in the right direction."

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