Banking regulator given new crisis powers

The banking watchdog will have beefed up powers to respond during a future financial crisis after new laws cleared parliament.

The Australian Prudential Regulation Authority's will now have greater flexibility to respond to distressed institutions in a bid to protect consumers and the wider financial system from a financial crisis.

"While no one wants to see the day a bank or insurer is in distress, through this bill we are taking important steps to safeguard the financial system for the wellbeing of the people of Australia," cabinet minister Michaelia Cash told the Senate on Wednesday.