Consumers are to benefit from more protection, while steps will be taken to educate the public to make better informed financial decisions.
The plans are part of the Chancellor of the Exchequer's reforms of the financial markets, which he announced to the House of Common's today.
Access to free financial advice, which is to be funded by the UK's banks and building societies, will be made available.
A strengthened deposit protection scheme is also to be introduced, which Alistair Darling said would include legislation to pre-fund and expand the role of the Financial Services Compensation Scheme.
Mr. Darling told the House: "Consumers will also get more protection, along with greater right of redress and access to compensation if things go wrong."
Plans to enlarge choice for consumers, which has contracted in recent times because of the disappearance of firms owing to the banking crisis, were also outlined. To this end, the Financial Services Authority and Office for Fair Trading have been charged with ensuring the new entrants can break into the banking market.
"We want to see greater competition and greater choice for consumers, as well as a bigger role for mutuals and building societies," said Mr. Darling.
"This way, we will see better informed consumers who have greater choices in a more competitive market."
The British Bankers' Association's chief executive, Angela Knight said of the proposals: "We welcome moves to support customers and believe that well educated and informed customers are able to make better financial decisions for themselves and their future."
The Chancellor also detailed plans to ensure that the UK's financial industries will face tougher regulation and scrutiny. The FSA has been given powers to penalise banks if their pay policies create unnecessary risk, and are not focused on the long term strength of their institution, he said.
The Authority will have to report on how banks are complying with their new Code of Practice for remuneration, and how it is dealing with firms that do not comply.
Furthermore, following Lord Turner's recommendations, the FSA will: strengthen rules to ensure banks hold enough capital as a buffer against losses; introduce a backstop power ensuring banks do not over extend themselves, leading to overlending; and increase the focus on bank liquidity, so they can continually carry out business.
A Council for Financial Stability, encompassing the Bank of England, the FSA and the Treasury has been formed and will monitor system-wide stability and respond to long term risks.
Mr. Darling also took the opportunity to re-affirm his belief that 'banks are best managed and owned commercially and not by the Government.'
The reforms were slammed by shadow chancellor, George Osborne, who labelled the White Paper as: "a totally inadequate response."
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