The Northern Rock panic did not inspire a new found confidence in many of us towards the banks and the banking industry.

However, there may be a silver lining to the financial grey cloud that has loomed over our heads for the last few weeks.

This is because a new law is going to be introduced to improve safeguards for banks in danger of going bust, and to protect savers' money.

Under plans announced in the Queen's speech, legislation will be introduced to improve the current framework for dealing with banks in "distress".

The government wants to reform the current system which has been widely criticised in the wake of the near collapse of the Northern Rock bank. The new laws may include a higher level of protection for depositors and a new legal regime to rescue insolvent banks.

Last month, the government launched a discussion paper on the issue, which examined a range of possible measures to protect savers. These included speeding up payments under the existing compensation scheme, and raising the level of savings covered under the scheme.

£100,000 guarantee?

The chancellor has already increased the level of savings that have a 100% guarantee under the current Financial Services Compensation Scheme (FSCS) from £2,000 to £35,000 in the wake of the crisis at Northern Rock.

He has now suggested guaranteeing the first £100,000 of savings, a move that would bring protection in line with that in the US.

More consultation

The government said any reforms must be "well understood by savers" with consumers "confident that they are protected by an appropriate, credible and reliable guarantee that can operate in a timely fashion".

Furthermore, the taxpayer's interests must be protected, and the cost of guaranteeing savings shared between all parties involved, it said. The government added that before it enacted any concrete measures it wanted to be "reasonably assured" that the benefits of the changes would exceed the costs.

Chancellor Alistair Darling told MPs last month:

This [forthcoming] regime would mean depositors are insulated from a bank that has failed, greater compensation for them and certainty their compensation can be paid out quickly.

 One positive effect of that would be the swift return of money to savers.

Lack of clarity

The government stressed that it "wants to be reasonably assured that the benefits of the proposed changes exceed the costs".

Martin Lewis, of Moneysavingexpert.com, has criticised the lack of detail in the Government announcements.

"The financial protection currently offered is abysmally confusing; and this has done nothing to help," he said.

He highlighted the problem under current under the current rules where the £35,000 threshold applies per bank, and not per account, and said that the rules of what constitutes a bank in these circumstances were "virtually impenetrable".

"If you've money in the Halifax, Bank of Scotland and Birmingham Midshires, all part of HBOS you've only £35,000 of protection. Yet if you've money in RBS and Nat West, both part of RBS Group you've £35,000 protected in each. After a year of panic and confusion, with the first run on a bank in living memory; the one thing everyone wants, and still waits for, is clarity.

Plans for unclaimed money

The Queen's speech also confirmed plans for legislation to allow the Government to use the estimated £0.5 billion currently sitting unclaimed in bank and building society accounts, to fund community projects.

Under the dormant bank and building society accounts bill, cash in accounts that have not been touched for 15 years could be transferred to community projects via the Big Lottery Fund. In England, this redistribution would focus on youth services, schemes to improve financial inclusion and capability, and social investment.

The bill would set up a reclaim fund, authorised by the Financial Services Authority (FSA), which would allow customers to retrieve any lost assets that have been taken into the scheme.

Savers would be able to reclaim their cash at any time, and would have the same protection for their money that is offered on cash held in bank and building society accounts.

So, will these new proposals make a difference to the banking system and restore your confidence in where you have your money saved?

Why not let us know in the comments?

Where should you put your savings?