Mortgage 'health warnings' planned

The Treasury is set to unveil proposals for financial products to come with "health warnings" assessing how risky they are.

Alerts - similar to those used for fatty foods and cigarettes - may be used for pensions and mortgages, Chancellor Alistair Darling is to suggest.

The Government's long-awaited White Paper on enhancing stability after the credit crunch will contain the proposals.

The Treasury's strategy will target improving bank management, giving consumers a "fair deal" and beefing up regulation.

Experts believe that the paper will back recommendations made by Financial Services Authority (FSA) chairman Lord Turner on tougher capital and liquidity requirements for banks.

Options for curbing excessive lending, such as a "tax on size" of balance sheets and stricter capital ratios for banks during boom times will also be proposed.

A new committee chaired by Bank of England Governor Mervyn King - comprising staff from the Bank and the FSA - is also likely to be proposed to oversee wider financial stability.

Mr King has called for more powers to discharge the Bank's responsibility for ensuring financial stability, although the FSA may also be in line for a boosted role.

The Governor also raised speculation over a clash with Mr Darling recently by warning that banks must not be allowed to become "too big to fail".

The White Paper will make clear that the Tripartite system set up by Gordon Brown - with duties shared between the Bank, the FSA and Treasury - is to remain largely unchanged - despite criticisms over its handling of the crisis.

It will also avoid the controversial issue of "capping" bonuses for bankers.

Alongside proposing health warnings, financial institutions could be asked to help fund programmes to make consumers more "financially literate".

Pilot schemes in the North aimed at giving bank customers better access to independent financial advice are also likely to be declared a success and expanded.

Ministers will also up the pressure on banks to deal with a backlog of around a million complaints about overdraft charges.

Copyright © Press Association 2009

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