New financial watchdogs are to be created with power to ban retail products and reveal pending enforcement actions against banks and brokers.

A tighter regulatory system will be enforced late next year when the Financial Services Authority will be broken into three new bodies- two regulators will monitor insurers and the banking system, alongside a consumer champion.

"It is a radical reform but the lesson of the financial crisis is that you need to have proper focus and clear mandates and the mandates need to be underpinned by the powers to do the job," Mark Hoban, the financial secretary to the Treasury told the Financial Times.

The Consumer Protection and Markets Authority is to be renamed the Financial Conduct Authority.

It will be given power to ban products or limit their sale for up to 12 months, announced Hoban.

Martin Wheatley, the outgoing head of Hong Kong's financial regulator the Securities and Futures Commission will head the watchdog.

Wheatley has experience regulating insider dealing and has overseen a crackdown on the mis-seklling of financial products.

Two other regulatory bodies, the Prudential Regulatory Auithority and the Financial Policy Committee, will work with the FCA.

The PRA will regulate individual insurers and banks.

The FPC, headed by Mervyn King, Bank of England governor, will aim to identify and deflate credit bubbles and monitor the "shadow banking sector", the institutions that operate outside the fringe of banking regulation.

After concerns about over-regulation and the balance between stability and growth, the FPC will be obliged to examine the impact of its policies on long-term economic growth.

These reforms are part of a move towards more rigorous regulation of the City, similar to that in the US, where there is more public scrutiny of the market.