Alistair Darling has proposed tougher new reforms to the financial system specifically targeting UK banks. Stricter regulations will be introduced with a view to giving the customer much greater consumer protection.

In a statement to the House of Commons, Alistair Darling said the financial system needed to ensure robust regulation, and banks and financial institutions should be better managed.

Some of the key proposals included:

• More help for consumers – a national money advice line funded by the banks and a strengthened deposit protection scheme
• Greater competition – the FSA and Office of Fair Trading to ensure that new players can enter the banking market
• Tougher banking regulation – banks required to hold more capital to cover any future losses and more powers for regulators to take over failing banks
• Executive pay – the FSA to report yearly on whether banks have met the new code of conduct on remuneration, and bank boards to be strengthened

The consumers association Which? hailed measures to increase protection for bank customers.

"We’re pleased that the government recognises the need to provide a better deal for consumers," said Which? chief executive Peter Vicary-Smith.

"Warnings about risky products, universally available money guidance and more choice on the High Street will all help to empower consumers in their dealings with the financial world."

This news comes at a time where more and more consumers are becoming aware of the fact they may have been mis-sold a financial product.

Stricter controls over banks should mean an end to issues such as the mis-selling of PPI, consumer credit agreements, whole of life insurance and unfair bank charges etc. 

BBC Business News

The City watchdog have announced that firms which mis-sell financial products to consumers and individuals guilty of insider trading are to face a hard new crackdown which could lead to serious fines.

The Financial Services Authority (FSA) wants penalties to be linked to the companies income, with up to 20% of their income from the products or business areas related to the breach being susceptible to the fine.

Last October Alliance & Leicester was fined £10 million by the FSA for serious failings in telephone sales of payment protection insurance – although this was reduced to £7 million due to early co-operation from the firm.

However under the new regime Alliance & Leicester could of faced a maximum fine of £30 million

Individuals found guilty of insider trading will be fined a minimum of £100,000.

Enforcement director Margaret Cole said: "By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules."

The consultation on the penalties regime will close in October and the new policy is likely to apply to breaches committed after February 2010.

In the last financial year the FSA imposed a record £27.3m in fines, up from just £4.4m the year before.

So far a total of 20 firms have been fined £11.8m over payment protection insurance.

Source: BBC & Press Association