Banks may soon have to draw up ‘living wills’ that detail their organisational structure.

New legislation is planned that will require banks to draw up ‘living wills’, which detail the company’s structure so it can be more easily dismantled in a financial crisis.

Within the plan, banks would have to detail which parts of their business they could sell to raise emergency funds, and how they would close down all trading operations within 60 days, according to the Financial Times.

The Financial Services Authority (FSA) would have statutory responsibility for future financial stability.

UK Chancellor Alistair Darling told the Financial Times on Monday (14 September): “Whilst the FSA has got the power to [introduce living wills], we are considering whether or not we need to make that more explicit, and in particular, I think we need a timetable.

“This is something you can’t just allow to drag on, because you can see [the potential] situation where people say, ‘Yes, yes, we must do something about it, but not yet’.”

However, the plan that banks should simplify their banking structures has not been welcomed by some within the industry. Michael Wainwright, a partner at Eversheds law firm, described the move as a “smokescreen”: “The living wills concept is being seen in some quarters as a back door way to compel banks to separate out their retail and wholesale business.

“This is misguided wishful thinking. The only way to achieve this would be through international agreement leading to a co-ordinated legislative programme across all major financial centres.”

The plans will be progressed in the Autumn.