Page last updated at 19:43 GMT, Wednesday, 24 March 2010

Bank accounts promised for one million more people

A purse
A Budget promise to make it possible for all to manage non-cash deals

UK banks will be legally obliged to provide a basic bank account to all under plans unveiled in the Budget.

The move was one of several supposed to tighten the way in which banks conduct their business after a year of unprecedented criticism of the sector.

Other changes included new targets for lending, with the threat of curbs on pay if they are not met.

The Budget also said it would promote banking competition by speeding up the licensing process for new entrants.

The universal banking pledge is designed to reach some of the 1.75 million adults who, according to a Treasury task force, have not got access to a transactional bank account.

These cut-down accounts typically let customers receive pension and benefit payments, provide a debit card and let people set up direct debits.

Limited business

But they do not offer overdrafts and usually do not let people have cheque books either.

There are question marks over whether the move is necessary.

The British Bankers' Association says that just about everyone can, in any case, have a bank account if they want one.

In another expected move, the government and the two state-supported banks, Lloyds and RBS, entered a legally binding agreement to lend more to business.

The two said they would provide a total of £94bn ($143bn) in small business loans.

The agreement states that, if banks do not raise the amount they do lend there would be penalties, with the implication being those would include pay cuts for executives.

The new figure is way higher than the £27bn set last year, but that was a net figure, which fell every time a business paid money back, while this new, gross target, ignores money coming in.

Critics point out that the new gross total is not much higher than the £80bn gross the two lent last year.

Banks as a whole have been under fire for not opening up their loan books to businesses desperate for funds.

Their argument is that the healthy ones are in the main keen to pay off debt in this economic climate, and the ones that do want funds are not good enough risks to lend to.

New banks

The promise to move faster when deciding whether to grant a new banking licence was welcomed by the consumers' organisation, Which?

Its chief executive, Peter Vicary-Smith, said: "People have been telling us how fed up they are with the sales culture that appears to have replaced customer service in our banks.

"New entrants in the market offering genuinely competitive products will help bring about the culture change the industry so desperately needs."

A further banking-related announcement in Budget 2010 was that the tax on bankers' bonuses would bring in £2bn, more than three times the amount forecast.

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