Finance plan to lead Queen's Speech

Banks are likely to face huge fines for failing to treat their customers fairly, with ministers making the current voluntary code of practice legally binding as part of major reforms to the financial sector.

The move follows concerns that institutions are flouting their own guidelines amid the fallout from the credit crunch. Small businesses have raised concerns about terms and conditions for loans and overdrafts being unilaterally changed at short notice, leaving them at risk of running out of cash.

The new statutory banking code will be policed by the Financial Services Authority, with firms breaking the rules facing unlimited fines, The Independent reported.

Currently, the most severe penalty for breaching the code is being "named and shamed".

Some other plans that were floated by Gordon Brown in May's draft legislative programme are believed to have been shelved to avoid hitting business and consumers.

Business Secretary Lord Mandelson is thought be behind many of these changes, including a U-turn on banning cigarette displays after fears it would hit small retailers.

Other features of the package - Mr Brown's last full programme before a General Election - will be a crackdown on benefit fraud and moves to get more people into work.