MPs warn that proposed banking reforms will not protect public from another crisis
March 20, 2013 at 2:21 pm
Radical reforms set out by the Government to curb Britain’s wayward banks have been criticised as too weak by the banking commission.
The commission, set up in 2012 after Barclays’ Libor scandal, counts the Archbishop of Canterbury among its members. Its job is to oversee a set of banking reforms that will protect the public from another financial meltdown. The Royal Bank of Scotland and UBS have already fallen foul of the commission and been fined enormous sums of money for malpractice.
High on the list of reforms is the ‘ring-fencing’ of public savings, in order to protect them from banks’ riskier operations. This will erase any need for repeat public bailouts of failing banks. However, the banking commission wants to go one step further and be granted powers to break up whole sections of the banking industry should things go wrong again. Effectively, this will let failing banks fail without passing the cost on to the public.
This is the second time the commission has called for tougher measures after it first criticised the Government’s report in December. They also accuse George Osborne of succumbing to the powerful banking lobby and trying to rush the reforms through Parliament. Indeed the Chancellor of the Exchequer has shortened the time frame for peer review of the changes.
Governor of the Bank of England Mervyn King has aroused further suspicion, pointing out Osborne’s overly close ties with influential bankers while lamenting the difficulty with which regulators were able to contact him at all.
Andrew Tyrie, who chairs the banking commission, agrees, stating that “the banks have lobbied very successfully in this area”. He goes on to say that this bill is absolutely crucial to the UK’s long-term financial health and that it is of paramount importance to seize this chance to make things right.
