The Bank of England will force UK banks to hold more cash in reserve by the end of the decade in a bid to eliminate taxpayer-funded bailouts.
Around 400 banks and building societies will have to hold a buffer of £223bn raised by selling bonds to investors.
The money will be either used to absorb losses or spent on financing an orderly wind down.
Banks will be obliged to comply with interim requirements by 2020 and by 2022 banks will have to hold sufficient resources.
The rules, which are based on European Union law, are called ‘The minimum requirement for own funds and eligible liabilities’, or MREL.
Mark Carney, Governor of the Bank of England, said: “This policy is a significant milestone on the journey to end ‘too big to fail’ in the UK.
“The implementation of MREL will ensure that banks that provide essential economic functions hold sufficient resources to be resolved in an orderly way, without recourse to public funds, and whilst allowing households and businesses to continue to access the services they need.”
In the aftermath of the 2008 financial crisis the UK government was forced to spend £115bn on bailing out the collapsing Lloyds Banking Group and the Royal Bank of Scotland.
Some of the UK’s largest banks were already obliged to bolster their financial cushions by 2019 due to international rules, but under the new rules this will apply to all UK banking institutions.