The moves will task the central bank with looking at risks to both the broad economy and individual banks and give it the power to force action such as increases in a lender's capital.
The proposals also keep a place for the Financial Services Authority (FSA) which had faced closure under initial proposals from the Conservative Party — lead partners in the new governing coalition.
"The Bank of England might decide in its role as macro prudential regulator that a bank should hold more capital because of concerns in the mortgage market," Financial Services Minister Mark Hoban told Reuters in an interview.
"There needs to be a mechanism to implement that. You need to work out how the institutional arrangements would work and how we give the Bank of England oversight of those microprudential decisions."
The moves — to be outlined by Osborne in his Mansion House speech to London's financial center or City — aim to shake up the way UK banks are supervised is part of a wider regulatory overhaul following the financial crisis. Retaining a role for the FSA represents a compromise between the Conservatives and their junior coalition partner, the Liberal Democrats, who had opposed such a move. Bankers had feared closing the FSA would disrupt the sector at a delicate time.
The government is now planning a financial crime-busting agency to beef up the policing of an industry blamed for triggering the worst economic collapse in a generation.
Hoban made the comments in Brussels, where he visited Michel Barnier, the European Commissioner in charge of an overhaul of financial services across the 27-country EU.
The former accountant made it clear that he opposed a push by European parliamentarians to beef up the clout of new pan-EU super watchdogs to make them responsible for supervising big international banks.
Hoban also called on other countries in Europe to follow Britain's example of testing how banks would hold up in the event of a further economic slump.
"What we need is confidence in the strength of financial markets. We need confidence in the banking sector," he said.
"We have been through a process in the UK of stress testing, a very rigorous exercise and I think that helped build confidence in the UK banking system."
Hoban signaled opposition to the idea of a tax on bank transactions, put forward earlier in the week by Jose Manuel Barroso, the head of the European executive or Commission.
"I think the bank levy is an area where we should be aiming for global agreement. There is a momentum behind this," he said.
"There has been some work that the IMF (International Monetary Fund) have produced ... which will point to some serious flaws in a transaction tax."
