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UK Chancellor supports measures to break-up banks that don’t reform
Banks that fail to comply with new regulations to protect investment operations from high-street banking will risk being broken up, UK Chancellor of the Exchequer George Osborne has announced.
By calling for “open markets with clear rules, properly policed” the Chancellor accepted a recommendation by the Parliamentary Commission on Banking to “electrify the ring-fence”, aimed at preventing banks from not complying with proposed reforms.
A previous report by the Independent Commission on Banking has called for ring-fencing to protect retail banking from investment operations.
Speaking ahead of the Banking Reform Bill’s introduction to parliament Mr Osborne said that “Banks require discouragement from gaming the rules. They will always try to do so unless strong disincentives are put in place”.
Mr Osborne’s speech, given at JP Morgan in Bournemouth, argued that the banking crisis of 2007, which saw the nationalisation of Royal Bank of Scotland and Lloyd’s Banking Group, and the recent Libor scandal had caused anger towards the banking sector.
“For many, the financial crash was confirmation of what they felt about our society: that those who are only out for themselves get away with it; and those who work hard and play by the rules get punished.
That is why, five years on from that crash, people are still so angry.
And when people discover more about what went so wrong: the mis-selling of interest rate swaps to small firms who went bust as a result; the greed and corruption on the LIBOR trading floor”.
Following the Chancellor’s speech Anthony Browne, chief executive of the British Banker’s Association, BBS, argued that the government’s proposals were “bad economics because it’s yet another measure that makes it more difficult for banks to lend money to businesses, which is what the economy needs at this stage”.
Concluding his remarks Mr Osborne had refuted the BBS’s position saying that the reforms would protect taxpayer’s money and that “Our country has paid a higher price than any other major economy for what went so badly wrong in our banking system. The anger people feel is very real. Let’s turn that anger from a force of destruction into a force for change. Change that will give us a banking system that will work for us all”.
