Tougher regulation for banks

The Financial Services Authority (FSA) is to be more intrusive in its approach to the supervision of banks and financial firms, the head of the regulator has announced.

In his review of the events which caused the current financial crisis, FSA chairman, Lord Turner, has revealed a raft of proposals that could significantly alter UK banking rules.

Amongst the report's suggestions is a limit on the amount banks can lend during better years to make sure they have reserves to fall back on in times of recession and an overhaul of the bonus systems that financial firms use to reward their employees.

However, any definite decisions over the possible reform of the mortgage market have been put off until later in the year.

The proposals have received a lukewarm reception from Which?, whose chief executive, Peter Vicary-Smith, said protecting consumers from rogue firms must be a priority if public confidence in the financial services industry is to be rebuilt.

"The FSA must show it has real teeth by hitting companies with bigger fines and naming and shaming offenders," he said.

"In terms of credit availability, we have gone from feast to famine," he added. "We welcome proposals designed to avoid a repeat of the current crisis but it is important that credit remains accessible to creditworthy individuals."