After telling banks to restrain their dividends to shareholders and bonuses to staff last year in an effort to build up capital, the FPC has now adopted a tougher stance by saying the banks need to raise capital from external sources “as early as feasible”.

The FPC, set up by the coalition to tackle systemic risks in the financial system, also attracted criticism from Andrew Tyrie, the chair of the Treasury select committee, for failing to explain why it was not going to ask the government for powers to intervene in the mortgage market.

The FPC did not detail how much more capital banks would need and it will now fall to the Financial Services Authority to have discussions with individual banks about their capital positions.

All them are holding capital well above the minimum regulatory requirements, but the FPC is more concerned about absolute capital levels than the ratio of capital to its risks.

The last time the FPC made pronouncements after its quarterly meetings it warned of the “exceptionally threatening environment” posed by the eurozone crisis and need to restrict bonuses and dividends to amass capital.

The members of the FPC, led by Bank of England governor Sir Mervyn King, agreed that financial markets but were still “fragile”, even with the European Central Bank’s long-term financial operations.

“Banks with large exposures to those countries where risks of persistent low economic growth and potential credit defaults remained high should be particularly alert to the need to build capital,” the FPC said.

The committee, which will not get statutory powers until next year, wants to be able to impose additional capital requirements on banks through what are known as “counter cyclical buffers” that can then be drawn down when the economy weakens.

But the FPC called for a wider debate about whether it should be allowed to intervene in the mortgage market to restrict the size of loans to the value of a home or the size of the loan according to the homebuyer’s income.

The figures, from the British Bankers’ Association (BBA), showed a slowdown in activity in the mortgage market with remortgaging levels at their lowest for 13 years.

Despite their cautious approach, consumers still spent £7 billion on credit cards in February – a similar level as the previous six months, the figures show.

Repayments outstripped new borrowing on credit cards by £39 million in February.

The repayment in unsecured lending was driven by weak demand, and continued payback, of loans and overdrafts.

Unsecured lending by the banks contracted by 1.8% in the 12 months to February.

“Businesses and households continue to be cautious about their finances in the face of difficult economic times and this shows up in a reluctance to take on new credit, or where possible, seeking to pay back bank borrowing,” said BBA statistics director David Dooks.

With interest rates set to stay at low levels for some time, the number of remortgaging approvals dropped to its lowest level for 13 years at 18,147.

Lenders have also become more choosy about who they accept for remortgaging.

The Office of Fair Trading (OFT) has extended its warning on how these companies should avoid sending unsolicited text messages or e-mails.

Yet the Financial Ombudsman Service saw a 18% rise in complaints in 2011.

There were 546 complaints made to the service about debt management companies last year, compared with 463 the previous year.

The ombudsman found in favour of the consumer in more than half of these cases.

Complaints included firms taking money from customers, but not passing this on to the people who are owed.

Another gripe was when people in debt spent a sizeable proportion of payments on fees, rather than on clearing debts.

Advice to the industry from the OFT includes a requirement to ensure that debt management products are suitable for customers’ specific issues.

The OFT also said it would take action against companies that made misleading or false claims, such as operating websites that made the firms appear to be the same as advice charities or a government body.

Those in debt should sometimes also be referred to not-for-profit advice organisations for assistance.

Households faced a tidal wave of difficulties in paying back debts a report by counsellors has warned.

Unsecured debts – such as the amount owed on credit cards – fell on average, but stagnant incomes caused continuing repayment problems.

Its report said youth unemployment and rising rents were major reasons for pushing its clients into debt.

It analysed 370,000 clients’ problems.

Lord Stevenson, chairman of CCCS, a leading debt advice charity, said: “It is good news that our clients are reporting reduced unsecured debts, but stagnating incomes mean that debtors had no more money available to repay what they owe. ”

The report from CCCS found that 42% of the under-25s who asked it for help last year were out of work.

The charity found that 55% of all its clients were living in rented accommodation, with the proportion admitting they could not pay their rent having risen by 30% in the past three years.

Those living in private rented accommodation appeared to have the most problems, owing more in unpaid rent than people living in council or housing association homes.

CCCS also reported a continued rise in the number of people aged over 60 asking for advice, which it predicted was the start of a new long-term trend.

“It is a sign of the shifting age profile of debtors as consumers struggle to pay debts, accrued earlier in life,” the charity said.

CCCS also said that it had seen a sharp increase last year in payday loan problems.

The FPC is being established as part of a wide-ranging overhaul of the UK’s financial regulation and will come into being as part of a new bill.

The Financial Services Bill will overhaul regulation of the sector.

The FPC held its first meeting in June last year, and from 2013 it will be the body taking the broadest overview of financial regulation in the UK.

It will tackle problems that affect the whole financial system rather than just individual firms.

One aim is to prevent a repeat of the Northern Rock collapse.

Mr Fisher said there was little the Bank could have done to prevent the build-up of leverage and unsustainable debt in the run-up to the financial crisis which began in 2007.

He said policymakers could not achieve two different policy objectives with a single policy instrument, and that raising interest rates to deter banks from building up leverage would have caused a separate problem in dampening down inflation too much.

He said the new system offered by the FPC would involve detecting and reducing threats to the financial system as a whole, ensuring the flow of financial services to the wider economy is maintained.

He said it was a “tough ask” and could never be perfect, adding: “Just as monetary policy makers will never be able to abolish the business cycle, financial policy makers will never be able to abolish the credit cycle.”

Mr Fisher added that the FPC should, however, make the system as a whole more resilient.

The drop from 2010 was mainly due to a 41% fall in fraudsters impersonating people to obtain or use credit cards.

There was also a 24% fall in the amount of fraud from cards being faked.

The UK Cards Association said it was the third year in a row that card fraud had fallen, with a drop of 44% since losses peaked in 2008.

It brings card fraud to its lowest level since 2000 when £317 million was lost through fraud.

The association credited the improvement to the increased use of anti-fraud measures.

Among them were online card verification software, such as Verified by Visa and MasterCard SecureCode, and the increased use of chip-and-pin technology abroad.

Although the adoption of chip-and-pin technology, largely replacing signatures, had helped to rein in fraud in the UK, there was a revival in the fraudulent use of cards abroad.

However, this has now dropped as well, with fraud abroad falling by a further 15% last year to £80 million.

That was its lowest level in 12 years, and nearly two-thirds down from the peak of foreign card fraud in 2008, when it stood at £230 million.

Overall, the most common losses last year were due to cards being improperly used to order items over the phone, by post or over the internet – so-called “card not present” fraud.

This accounted for £221 million – nearly two-thirds of all card fraud losses.

Meanwhile counterfeit card fraud, once the second-largest category of loss, has slumped in the past five years, down by three-quarters since 2007.

Meanwhile, fraud losses against online banking accounts fell by 24% last year to £35 million, while fraud losses involving telephone banking rose by 32% to £17 million.

Meanwhile, the regulator should have a fast-track system to suspend credit companies’ licences, the MPs said.

Vulnerable people were at risk during tough economic times, they warned.

The committee concluded that the regulator should have the power to ban “harmful products” that put customers unfairly into debt.

Concerns were also raised about payday lenders that offer short-term, high-interest loans to consumers, with the suggestion that the money is paid back within a month.

The rollover of these loans for month after month should be limited, the committee said.

The Office of Fair Trading is already investigating the tactics of the payday loan industry in a review expected to be completed later in the year.

The committee also called for upfront fees to be phased out by debt management companies, which charge to offer advice to individuals on dealing with their debts.

The watchdog has outlined what these letters should contain, including details of a time limit for making a complaint.

It said the dispatch of letters was a “key moment” in the PPI saga.

Customers will need to respond to the letters to make a claim for compensation.

Consumer groups have pointed out that people can complain directly, for free, without using a claims management company that would charge a proportion of any resulting payout for its service.

PPI was supposed to repay people’s loans if their income dropped because they fell ill or lost their jobs, but hundreds of thousands of people were mis-sold the policies.

Banks paid out £1.9 billion to the victims of mis-sold PPI last year, with many thousands of people having successfully applied for compensation.

The FSA said these institutions were now looking into how to treat customers who had been mis-sold PPI, but had not complained.

The FSA expects banks to write a total of anything between four million and 12 million letters to customers who might have been affected.

These letters must:

• Make it clear to customers that the letter is important, that they might have been mis-sold PPI, and why
• Explain that they might have lost out financially and could claim for compensation
• Be written in language that is free of jargon and marketing
• Point out that any claim might be subject to a time limit

The FSA said that, in most cases, deadlines included a six-year timescale from the date of sale for customers to complain.

However, customers must put in a claim within three years of when they were made aware, or ought to have been aware, that they had cause to complain.

This marked a drop from 149,925 cases during the previous six months, which featured a slew of new payment protection insurance (PPI) cases.

However, the proportion of cases upheld in favour of consumers rose to 72%. This compared with 47% in the first half of the year.

PPI remained one of the key issues seen by the FOS, which deals with unresolved issues between customers and financial businesses such as banks, insurance companies and investment firms.

Banks had put new PPI complaints on hold until the outcome of a legal challenge was known.

However, in April last year, their defeat in the High Court case meant the banks were obliged to start processing a backlog of more than 200,000 cases.

Banks were then allowed more time to deal with the backlog. This led to a 53% fall in PPI cases in the second half of the year compared with the first six months, to 46,700.

But the ombudsman expects the numbers to rise again sharply in 2012-13 to a new high of 165,000 PPI complaints.

Nearly two thirds – 66,806 – of all the new complaints referred to the FOS in the second half of last year were about the five biggest banking groups and two big credit card providers.

Most complaints by firm:

• Lloyds Banking Group – 20,310
• Barclays – 12,273
• RBS – 6,553
• Santander – 6,202
• HSBC – 6,190
• MBNA – 9,903
• Capital One – 5,375

Families of pensioners are hiding their wealth to avoid paying care home fees.

The threshold differs slightly in Wales and in Scotland care home residents are able to access free personal care.

The funding of residential care of the elderly divides public opinion.

The question of who should fund the residential care of the elderly is one that divides public opinion and local authorities.

The huge variation between local authorities means the first question advisors are asking is: where do you live?”

If a council can prove that individuals have deliberately deprived themselves of assets in order to avoid paying care fees, they can take legal action to recoup what should have been paid.

The lack of uniformity in the local authorities’ approach to the issue has been criticised by financial advisers.

Not only that, but taking legal action can be really expensive and the total legal costs incurred by local authorities can end up being more than the sum they might recover.

Northern Ireland and Wales operate a similar means test system to England, while Scotland offers free personal care according to eligibility.

The uncertainty about how care fees will be funded in the future is leading some families to seek ways of protecting their assets.