The Treasury is to be given sole power over when to bail out banks in the event of another financial crisis, under new plans announced by Chancellor George Osborne.
The Financial Services Bill, which has been laid before Parliament, will give the Chancellor the authority to order the Bank of England to pump money into the financial system in any future banking crisis.
The Treasury will be able to order liquidity support for an institution, the unwinding of its operations and all other aid for the financial system that requires taxpayers' money.
The legislation removes any confusion as to who has ultimate authority in a crisis, but was opposed by the central bank earlier in the month.
The BoE wanted the division of powers to be contained in a 'memorandum of understanding' instead of being enshrined in law.
The bill attempts to draw a line under the regulatory failings that forced taxpayers to stump up hundreds of billions of pounds to shore up the banking sector in 2008.
Mr Osborne announced the details during his visit to the World Economic Forum in Davos, Switzerland .
He said: "When taxpayers' money is at risk in a crisis this legislation gives the Chancellor the power to direct the Bank of England to act.
"For the first time it will allow the Chancellor to direct specific liquidity interventions to assist individual entities, the special resolution regime for banks, and general interventions to preserve stability as long as the Government is willing to take responsibility for the action and take the resulting risk on its balance sheet."
The bill will radically reform the way the whole financial system is regulated. It also includes plans to scrap the Financial Services Authority from 2013 and give the Bank of England powers to supervise banks and insurers.
A major failure of the 15-year-old "tri-partite" system of financial regulation at the time of the 2008 financial crisis was a lack of clear lines of responsibility between the FSA, the BoE and the Treasury, which shared the role.
Mr Osborne added: "There will be no ambiguity about who is in charge."
The Treasury will have the power to direct the BoE, only "if the direction is necessary to resolve or reduce a serious threat to the stability of the financial system of the United Kingdom", according to the bill.
Alistair Darling, the Labour chancellor during the 2008 crisis, wrote in a book last year of his frustration at not being able to order the central bank to do what he felt was right.
"The Bank was independent and the governor knew it. We did not agree on what to do," Mr Darling wrote.
The bill also stipulates that a future BoE governor should serve a single eight-year term rather than the current, renewable, five-year term.
Sir Mervyn King's term as governor is due to expire in the middle of next year.
The FSA will be replaced by two separate bodies: the Financial Conduct Authority, to police markets and regulate consumer credit, and the Prudential Regulatory Authority - a subsidiary of the BoE to concentrate on the day-to-day supervision of banks.
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