What's that? Politicians actually using the power that they already own? Surely they must be joking. We simply don't do these things in America, where we're afraid we might upset the banking executives who are still debating whether or not they can slip in bonus payments despite record failures and a bailout. It would not be proper.
Banks will face huge fines if they do not treat their customers fairly, under a crackdown to be announced by the Government today.
Ministers have decided to turn the voluntary code of practice operated by the banks into a legally-binding one, amid mounting concern that they are flouting their own rules during the credit crunch. The move follows claims that small businesses and individual customers have had the terms and conditions of their loans and overdrafts changed overnight by their banks.
Small firms have complained to ministers that they have received letters or emails unilaterally changing agreements, demanding that homes are put up as collateral for loans and giving customers just 48 hours to sign up to such new arrangements. "There is mounting evidence that the banks are not sticking to their own code," one government source said last night.
A statutory code, opposed by the banks, will be announced by the Chancellor, Alistair Darling. It will complement a Banking Bill in the Queen's Speech today – which aims to prevent a repeat of the crisis which engulfed banks this autumn. The new code will be policed by the Financial Services Authority. The watchdog is expected to be handed powers to impose unlimited fines on banks which breach the code and to take "enforcement action" against those who refuse to change bad practices. The most severe punishment under the existing code is public censure by the board which oversees it.
Although a legally-binding code would not force the banks to lend more to businesses and householders, ministers will increase the pressure on them to "unblock" the system.
