Bank reforms should not be delayedWhich? backs Vince Cable in row with banks
31 August 2011
The Independent Commission on Banking, which reports on 12 September, is expected to recommend a separation between UK retail banking and investment banking.
Banking reform supported by Which?
The ring-fencing of retail banking has been supported by Which? chief executive Peter Vicary-Smith, and by the Business Secretary Vince Cable, despite calls from the banking industry for reforms to be delayed.
Commenting on the need for change, Mr Vicary-Smith said: 'Claims that ring-fencing of retail banking would be damaging to the British economy are both alarmist and incorrect.
'Failure to ring-fence retail banks would pose a far greater danger. This country cannot afford another bank bailout, yet we would be left with no choice if we allow banks to continue to intertwine vital retail banking services with riskier ‘casino’ banking.
'That’s why the Government must not delay in implementing these reforms. Giving the banks years to put a ring-fence in place will just prolong the exposure of British taxpayers and the wider economy.'
Vince Cable's battle with the banks
Dr Cable had earlier rejected calls for delay: 'It is disingenuous in the extreme to use the current context to argue against reform.
'Banks are in a way trying to create a panic around something which they know has got to happen. The governor of the Bank of England and many other people have been arguing that we have to deal with the too-big-to-fail problem.
'We cannot have big global banks with balance sheets bigger than British GDP underwritten by the taxpayer; this cannot go on and it has got to be dealt with.'
The Business Secretary's statement echoes remarks he made at a Which? Banking Reform debate in July this year: 'My own instincts lie with the full separation of retail and proprietary banking. If banks know they are too big to fail, they take excessive risks and this is not sustainable. Taxpayers should no longer have to bail out banks if they hit financial difficulties.'
Bankers call for delay
In a message to the Independent Commission on Banking, Angela Knight of the British Bankers' Association said: 'From now on the UK’s efforts must be focused on economic recovery. This means allowing the banks to finance the recovery first, pay back the tax payer next, and only then turn to further regulatory change. If more regulation remains at the top of the list then this will only have the effect of risking the recovery which is so essential to our future.'
For more on this...
- See the Which? Campaign for Better Banks
- Read Vince Cable on Which? Coversation
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