Financial supervision proposals due on Wednesday

LONDON (Reuters) - Proposals for the future regulation of the financial sector will be published on Wednesday, Prime Minister Gordon Brown's spokesman said on Monday.

The blueprint will outline how the government aims to avoid a repeat of the worst financial crisis in living memory by giving more power to authorities to intervene quicker and setting tougher rules for banks.

"The Chancellor (of the Exchequer Alistair Darling) is publishing a Treasury paper on the regulation of financial services," Brown's spokesman told reporters.

Analysts expect the reforms to include heavier liquidity and capital requirements for banks to give them more of a protective cushion when trading conditions deteriorate, but such a move would also put pressure on profit margins.

Salaries are also likely to come under greater scrutiny, given concerns that outlandish bonuses and pay encouraged the risky behaviour that led to the credit crisis.

However, the reforms are not expected to overhaul the tripartite arrangement which spreads out the responsibility for financial stability and oversight between the Financial Services Authority, the Bank of England and the Treasury.

Bank Governor Mervyn King has been outspoken in his concerns that the BoE does not have the powers to properly deliver its financial stability remit and has openly disagreed with Darling on where the priority should lie for regulating banks.

King said last month he had not been consulted on the reforms and should not be blamed if anything goes wrong.

Treasury minister Paul Myners has said both the BoE and the FSA would get new powers to help prevent future financial disasters.

(Reporting by Sumeet Desai and Matt Falloon, editing by Mike Peacock)