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Depositors could see up to £50,000 of their funds protected under new Treasury proposals in the wake of the financial collapse of Northern Rock, but banks will not yet be forced to pay into a pre-funded pot.

Setting out the plans in a 169-page report on Tuesday, Alistair Darling, Chancellor of the Exchequer, aimed to toughen up depositor protection rules, with measures which include increasing protectable deposits from £35,000 to £50,000 a person a bank, through the Financial Services Compensation Scheme.

Another proposal is to allow the FSA to collect information on firms on request of the Treasury or the Bank of England. Presently it can only demand what it can prove it needs for its own regulatory purposes.

However, Mr Darling did not completely take on the Treasury select committee recommendations that institutions be made to pay into a pre-funded deposit protection fund. The option was, however, left open for future implementation.

In January, the select committee published its Run on the Rock report, which stated: “Ensuring the speedy release of funds under any scheme is of critical importance, and we propose measures to provide for this. We recommend the establishment of a deposit protection fund to be funded by participating institutions.”

John McFall, MP, chairman of the Treasury select committee, said: “I note the government are legislating for a pre-funded scheme, but are not committing to it presently. In the long run, it is important for consumers to have confidence in the financial system, and banks and building societies have to play their part in contributing to this.

“Depositors need reassurance that the money is there. How do banks and building societies plan to secure this level of confidence in the absence of a pre-funded scheme?”

But the Treasury report highlights the danger of making banks pay into a pot when liquidity is low across the sector.

It stated: “The authorities are not, therefore, proposing to introduce pre-funding immediately. They do, however, believe it is important to keep under review the introduction of pre-funding for the FSCS.

“The government therefore intends to include in the forthcoming legislation powers which would allow it to introduce pre-funding of the FSCS if it was considered appropriate to do so in the future.”

The British Bankers’ Association backed the decision to focus on regulation and intervention, rather than the need for a pre-fund pot.

Neil Johnson, policy manager for the Building Societies Association, said: “It is better to speed up payments to depositors if there is a problem. Pre-funding would deprive companies of significant levels of funding.”

There are currently about £950bn in UK deposit accounts in 154 banks, 59 building societies and 559 credit unions.