Health warnings on financial products

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Indy Politics

Financial products could come with "health warnings" saying how risky they are, under proposals being unveiled by the Treasury today.

Chancellor Alistair Darling is to suggest using alerts, similar to those already employed on cigarettes and fatty food, for pensions and mortgages.

The idea will feature in the Government's long-awaited White Paper on enhancing stability in the wake of the credit crunch.

A three-pronged strategy will focus on beefing up regulation, improving management of banks, and giving consumers a "fair deal".

The document is expected to endorse recommendations on tougher capital and liquidity requirements for banks, put forward earlier this year by Financial Services Authority (FSA) chairman Lord Turner.

It will also set out a range of options for curbing excessive lending - such as imposing tougher capital ratios for banks during boom times, and a "tax on size" to prevent balance sheets ballooning out of control.

A new committee chaired by the 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, 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.