In what is being billed as one of the biggest shake-ups of financial regulation for decades, Lord Turner will call for more co-ordination between regulators and central banks to help gauge when the economy is overheating. He will also say that banks which offer big bonuses for traders dealing in high risk assets should be required to hold more capital.

For retail banks the paper will call for restrictions on the type of assets banks can invest in. Lord Turner will also launch a crackdown on the use of offshore, off balance sheet funding vehicles by banks.

FSA's crackdown on City pay is legitimateIn the hedge funds sector, he will open the door for some of the larger, often secretive institutions to be subject to the same level of regulation as banks.

Banking bosses could also be forced to hold relevant banking qualifications, something that many of the top directors of Royal Bank of Scotland and HBOS did not have prior to the two banks having to be bailed out by the Government. Finally the report is expected to propose that all financial services companies be required to undergo extreme stress testing, detailing under what circumstances they could go bust.

The proposals will be unveiled at the same time as the FSA publishes its report into the pay structures at British banks.

The report on pay will include findings from detailed submissions by all UK banks into their pay structures. The FSA has made it clear it wants to curb the culture of bonuses for short term gains.

However any move to curb bonuses will be opposed by unions who are concerned that their members, many of whom earn as little as £12,000 per year, could be forced into financial hardship if they do not receive their normal bonus. Unions are currently lobbying MPs and UK Financial Investments, the body that controls the taxpayer's holding in Lloyds and RBS, to increase Lloyds' bonus pot.

Although Lord Turner has described his proposals as "revolutionary", for many they do not go far enough. Financial commentators including the Liberal Democrat Treasury spokesman Vince Cable have called for banks to be split up into their retail banking arms and investment banking operations, separating what are considered to be, respectively, low risk and high risk operations.