The Bank of England (BoE) has given banks another two years to build £20bn of extra capital to ensure that they avoid a taxpayer bailout if they collapse.

The banks can gather extra capital until 2022, instead of the earlier planned date of 2020.

Banks will be set interim targets, which will be reviewed to determine the impact of Britain's departure from the European Union on regulation.

The central bank earlier said that the rule would be applicable to all banks with over 40,000 accounts. However, it now modified the scope of the rule to include only banks with more than 80,000 accounts.

BoE governor Mark Carney said: “This policy is a significant milestone on the journey to end ‘Too big to fail’ in the UK.

“The implementation of MREL will ensure that banks that provide essential economic functions hold sufficient resources to be resolved in an orderly way, without recourse to public funds, and whilst allowing households and businesses to continue to access the services they need.”

The new rule follows a consultation started by the central bank in December 2015 to avoid a repeat of the bailout seen during the financial meltdown.

The extra buffer or Minimum Requirement for own funds and Eligible Liabilities (MREL) is a requirement under the EU Bank Recovery and Resolution Directive that aims to help failing banks absorb losses.