Labour and Liberal Democrat peers have narrowly failed to overturn government proposals to push through banking regulations they claim will make it easier for senior bankers to escape prosecution following a financial crash.

Several independent peers joined the government to vote down an amendment that would have retained tougher rules on bankers first put in place following the collapse of Britain’s banking system in 2008. The amendment was defeated by two votes.

The new rules had reversed the burden of proof for senior bank and insurance executives, forcing them to show they acted within the law and complied with tough new financial regulations following any collapse or the emergence of wrongdoing.

Conservative peers and legal experts, including the human rights lawyer David Pannick, said the government was justified in switching the burden of proof back to prosecutors to prevent bankers from being unfairly singled out.

Anti-poverty campaigners said the vote would allow bank executives to repeat the mistakes of the past and get away with it.

The charity Global Witness said: “This is a terrible outcome ... the government has watered down rules to hold senior bankers accountable for bad behaviour. This also comes at a terrible time.

“In the few weeks since the government made its plans clear, UK banks have been involved in three big misconduct scandals. The government needs to urgently rethink its plans before the bill goes to the Commons.”

The row over the change to the “senior managers and certification regime” was sparked by a sudden U-turn in October by the Treasury to water down legislation that had been passed only two years ago.

In 2013, the coalition government was responding to the parliamentary commission on banking standards, which was established in the wake of Barclays’ fine for rigging Libor.

Reversing the burden of proof – to make bankers prove they had taken the right course of action – was regarded as a way to make it easier to hold senior executives responsible for collapses of banks.

When it announced the decision to undo the law change – which is effective from next March – the government said it was widening the scope of the new regime beyond the 1,500 banks, building societies, credit unions and some investment firms to 60,000 financial firms.

Before the vote, the Labour peer Denis Tunnicliffe had accused the government of making a huge mistake in conducting the U-turn. Writing in a blogpost, he said: “There was a time when banks and bankers were trusted and respected. Ask the public now, however, what they think and they will use words like greed and exploitation. The road back to public confidence will be long and difficult. But we believe the starting point lies with the reverse burden of proof.”

Lord Tunnicliffe said the peers had “acted reasonably and responsibly” in deciding to vote on the matter, to avoid criticism that they were using their majority in the Lords to head off government policy.

“Where the government has made a convincing case, we have listened – specifically on the issue of proportionality,” he said, referring to the issue of extending the regime across the entire sector and not just banks. “But this isn’t a good enough reason to backtrack, and if ministers were prepared to bring forward proposals that accommodated smaller firms whilst retaining the burden of proof we will be open to further discussion,” he said.

During the debate, the former cabinet secretary Andrew Turnbull, a crossbench peer, said there was no evidence from recent reports into banking collapses that a reverse burden of proof would have gained a conviction.

Lord Pannick, the human rights barrister and crossbench peer, said the case for reverse burden of proof had not been made. “It appears the main justification in favour of retaining the reverse burden of proof is that it will be difficult to prove a failure to comply with the new duty to take reasonable steps.

“But the regulator has all the necessary powers to show whether a senior manager has complied and taken reasonable steps. If there is no document trail, then the regulator will rely precisely on that in establishing whether reasonable steps were taken. You change a culture by insuring the regulator brings a proper disciplinary charge. You do not change a culture by bringing in an unfair regime.” he added.

Rob Moulton, regulatory partner at law firm Ashurst, said: “A reversed burden of proof for bankers would put them in a uniquely exposed position among those in senior business roles. The question is whether politicians still think their previous actions deserve such special treatment”.