Consumers will receive more information about their rights
Banks will face fines for poor treatment of their customers when the City watchdog takes over regulation of retail banking conduct in November.
The Financial Services Authority (FSA) will replace a voluntary banking code with its own rules for banks, building societies and credit unions.
It said this would ensure customers were treated fairly, be kept informed and make it easier to switch accounts.
The body which represents the banking industry welcomed the proposals.
At present, consumers are protected by a voluntary code that offers guidance on how banks should behave towards retail banking customers. This does not carry the threat of fines.
The FSA, the City watchdog, will now oversee how banks deal with their day-to-day customers, with a team carrying out mystery shopping exercises to make sure they are being treated fairly.
The rules will include measures to make it easier for people to switch accounts between different providers, and they will also be given more notice of interest-rate changes.
The watchdog has been critical of institutions for delays when customers wanted to switch their cash Individual Savings Account (ISA) to a different bank or building society.
It will require banks to provide prompt, efficient and fair service for their customers, and offer information about their accounts at the appropriate time.
Before the new rules come into force the FSA will publish comprehensive information for consumers detailing their rights and outlining what they can expect from their bank or building society.
"These are important new standards that firms will need to meet. They will affect consumers' everyday interaction with banks," said Jon Pain, the FSA's retail managing director.
Vera Cottrell, from the consumers' association Which?, said: "The FSA has to get tough as a regulator and use its full range of powers to keep banks in check. If it relies on the industry to develop its own code, consumers could find themselves worse off.
"Instead of closing the stable door after the horse has bolted, it must be proactive in finding and dealing with problems or consumers will lose out."
Responsibility for treating customers fairly over borrowing, such as overdrafts and credit cards, will remain with the Office of Fair Trading.