The government has published its draft Banking Reform Bill on 12 October, marking a crucial point in its plan to improve the stability and competitiveness of the UK banking system.
The draft Bill will now be scrutinised by the Parliamentary Commission on Banking Standards, headed up by Andrew Tyrie MP, before it is formally introduced into Parliament. The Banking Reform Bill will separate retail banks from their investment banking arms, which should make it easier and cheaper to manage if they get into difficulties, and provide greater protection for consumers.
Ring-fencing banks to safeguard consumers
Which? chief executive Peter Vicary-Smith, said: ‘We’re pleased the government is committing to important banking reforms. Ring-fencing risky investment banking from retail banking will help ensure consumers don’t have to foot the bill for a banking bailout that cost £2000 for every man, woman and child but it doesn’t eliminate the risk completely.’
On the Bill, Andrew Tyrie said: ‘It is vital to get this right, not just for the sake of the banking industry but in the best interests of the economy as a whole and the millions of businesses, households and individuals who rely on it.’
The government plans to have all legislation in place by the end of this Parliamentary year, while banks will be required to comply by the end of 2019. Peter Vicary-Smith said: ‘The banks shouldn’t wait for the government’s 2019 deadline but should implement these changes as soon as possible so that consumers are protected.’
A Big Change in banking culture
The Bill will play a vital part in changing the way the UK banking system is run, as Peter Vicary-Smith adds: ‘We want to see big change…so that banks work for customers, not bankers. The government must go further to increase competition on the high street and refer the banks to the Competition Commission now so that the banks are forced to provide better service and value for money.’
Andrew Tyrie feels that the Bill will have a big impact on banking culture: ‘Structure influences the incentives and behaviour of banks and bankers. With that in mind, the Commission will examine the draft Bill to see what contribution it is likely to make to improving banking standards.’
The Parliamentary Commission on Banking standards will be issuing a call for written evidence arising from the draft Bill next week.