Q&A: What the reforms mean for you

Alistair Darling’s proposals to reform the financial industry are designed to improve consumer confidence in the banks, bringing a greater level of protection to customers’ savings and providing better access to mortgages at a reasonable price.

How does he hope to achieve this?
Mainly by stepping up the regulation of banks and improving the way they are managed. The chancellor believes that by keeping a closer eye on the risks banks are taking and increasing awareness of these risks, the government will offer savers greater security. New rules on capital requirements should strengthen banks’ balance sheets, while better procedures are being established to deal with bank failures.

What does this actually mean for my savings?
There are few concrete measures in the white paper that really benefit consumers. The government wants to do more to help savers with money in foreign banks and is considering setting up a pan-European deposit guarantee scheme. It has also mooted the idea of pre-funding the Financial Services Compensation Scheme so the safety net is already in place in case of a bank collapsing.

Isn’t my money safe anyway?
No retail saver has yet lost money in the event of a bank failure. When Icesave, the Icelandic bank, collapsed, the UK government stepped in to ensure all its customers received full compensation. But a pan-European protection scheme would give an extra layer of security.

What about my ability to borrow?
The white paper set out plans to encourage banks to lend fairly and at a reasonable price. More stringent cash requirements could limit their capacity to offer high loan-to-value mortgages, however, although it does not look like the government will impose caps on these.

It may widen the remit of the Financial Services Authority to include buy-to-let mortgages and second charge mortgages, where a borrower takes out an additional loan on their property through a different provider. The chancellor also said he may take steps to protect borrowers if their mortgage lender sells its loan book to an unregulated provider.

And any changes to other investments?
The government is keen to improve awareness of different types of investments. In the white paper it said it wanted to give consumers better access to simple, transparent products and make sure they knew the risks they are taking. Again, it is not taking any immediate action but said it was considering a traffic light system similar to food labelling which would flag up complex or riskier investments and give consumers a better idea of what is suitable for them.

There are also plans next year to roll out a national money guidance scheme which would offer free impartial financial advice to consumers and help people who lose their job, for example. The government also wants to improve the financial complaints procedures.