Alistair Darling’s ideas for reforming bank regulation are as much about being seen to do something as providing a serious answer to the Northern Rock disaster. The Chancellor needs something to say when he appears before MPs on the Treasury Select Committee next week.

Giving new powers to the Financial Services Authority does not inspire great confidence. The FSA already has plenty of powers. What it has lacked in the past is sufficient energy and foresight to use them.

Nothing in Mr Darling’s admittedly sketchy proposals would prevent another Northern Rock getting into trouble. That requires the FSA and, indeed, other bank regulators to push liquidity back near the top of the supervisory agenda and to force banks to stress-test their business models with much more rigour than in the past – something that they are starting to do.

But that does not mean that Mr Darling’s proposals are without merit. They should make life easier the next time a bank gets into difficulties. What really infuriates ministers and regulators is that Northern Rock continues to be run as a semi-independent organisation, despite being in hock to the State for tens of billions of pounds. Shareholders and the board continue to wield power, complicating an already fiendishly difficult rescue deal.

The latest proposals should enable the authorities, when coping with future Rocks, to get their hands firmly on the levers without being distracted and stymied by rebellious shareholders. But with legislation being introduced only in May at the earliest, it will come too late to help ministers to squash Rock’s still-influential and vociferous shareholder base.

Fine-tuning the muddled tripartite arrangements is also to be welcomed if it more clearly spells out that the buck stops with the Chancellor.

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