The government has announced that nationlised bank Northern Rock is to be split in two on the first of January 2010. The two new ‘good’ and ‘bad’ banks will be called Northern Rock plc and Northern Rock (Asset Management) plc respectively.

The ‘good’ bank will hold all existing savings accounts along with around 15% of the mortgage book, and will carry out all new lending and control some wholesale deposits. This bank is intended to be profitable and will at some point be sold back into the private sector. A further £8bn loan has been granted by the government to finance new lending and support deposits.

The ‘bad’ bank will be left with around £50bn of mortgages, which it will over time wind down before being closed down.

Northern Rock customers will be told by letter which of the new banks will be in charge of their mortgage, and need take no action.

The publicly-owned banking giant RBS-Natwest has bucked the banking industry trend by drastically reducing the charges incurred by overdrawn accounts. The move comes ahead of a ruling on whether the Office of Fair Trading will be given the ability to regulate banking charges, after years of argument over whether the amounts charged by banks were punitive and unfair, and therefore illegal.

Representatives of the banking group however denied that the new reductions were in response to government pressure, and that the decision was taken on a purely commercial basis.

The new charges are:

• Charge for a bounced cheque, standing order or direct debit: £5 down from £38
• Monthly charge for overdrawn accounts: £20 instead of £28
• Charge for payment on overdrawn account: £15 down from £30
• Guaranteed cheque payment: £15 instead of £35

Consumer groups have welcomed the change, and predicted that other banks will soon be forced to follow suit.

The amount of money people can save tax-free in an ISA is to be raised to £10,200 according to the chancellor in yesterday’s budget.

Currently, a maximum of £7,200 can be deposited into an ISA each financial year, of which up to £3,600 can be in the form of cash deposits with the remainder invested in shares. Under the new rules, up to £5,200 can be in cash.

The increased limits will come into effect for most people next April, although people of over 50 will be able to take advantage of the new rules this tax year, from October 6th onwards.

Tesco is to spread it’s financial services reach into the physical world by opening 30 in-store branches to sell and manage its insurance, loan, credit card and savings products. The supermarket giant also plans to offer current accounts within 2 years.

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The 5th of April is fast approaching, which is the deadline for taking advantage of the 2008/9 tax savings an Individual Savings Account (or ISA) provides.

The next few weeks is the peak season for ISA providers, so be prepared to get some great cashback or discount offers as the competition hots up.

Leave it to late and your 2008/9 tax allowance will be gone for good!

US President Obama has announced that the bosses of banks and other companies which are receiving substantial state aid in the current climate will have their salaries capped at $500,000 - a figure substantially less than the salaries paid to the CEOs of the UK’s partly nationalised banks.

The move will undoubtedly increase pressure on the UK government to introduce a similar cap, although critics say the UK bank bosses would simply find a way around it if introduced.

The Bank of England have today reduced the base rate to 1% in a widely expected move. While this is good news for people with tracker mortgages, many of whom will now find their mortgages virtually interest free, it’s yet another kick in the teeth for savers who will now find their returns down to almost nothing.

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The government has said that it wants to extend the range of banking services available over the counter at the national network of Post Offices, and that the Business and Enterprise Select Committee is to look at the options available.

The Post Office already offers a range of financial services including savings accounts although these are provided by the Bank of Ireland. It’s thought that the Post Office could be used as a vehicle to increase lending backed by the government, although there has been no confirmation of this.

A survey of 15,000 banking customers has shown that smaller banks lead the way when it comes to customer service. The survey, conducted by Which? showed that Smile, First Direct, and The Co-operative Bank came out on top, while high street giants Abbey, Barclays and the Halifax brought up the rear.

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Britain’s second largest bank, the Royal Bank of Scotland (RBS), has said it will guarantee interest rates on business overdrafts for the next twelve months at least.

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