The UK Treasury has published a
consultation document, Reforming Financial Markets, dealing with a
wide range of subjects including consumer protection and risk
management, largely backing up proposals set out in a report
published in March by Adair Turner, chairman of regulator the
Financial Services Agency (FSA).

Among the government’s proposals which relate
to retail banking is the creation of an independent consumer
education and information authority. Proposals to ban lenders from
raising borrowers’ credit card limits without their consent,
sending out unsolicited credit card cheques or increasing interest
rates on existing debts are also contained in the document,
together with a tightening of the regulations relating to
second-charge mortgages.

In addition, the government set out plans to
improve arrangements for depositor protection, including
legislation to pre-fund and expand the role of the UK’s financial
services compensation scheme.

But the document was silent on the mooted
split of large banks’ retail and commercial activities from their
investment banking operations, nor did it advocate a reduction in
size of complex banks, an idea being canvassed by European Union
Commissioner Neelie Kroes.

The document is the latest in a series of
announcements from the government and the FSA aimed at reforming
and strengthening the financial system.

Next up is a government-commissioned report
from David Walker, to be released in the autumn, looking at
measures to deliver improved corporate governance at financial