Britain's banks will be given until 2019 to implement sweeping reforms designed to ensure taxpayers never have to bail them out again, George Osborne announced yesterday.
The Chancellor rejected Labour charges of "foot-dragging" and promised that all the legislation to bring in the changes would be on the statute book before the next general election, due in 2015.
He welcomed in principle yesterday's blueprint from the Independent Commission on Banking (ICB), that called for firewalls to be built between the banks' high street and riskier investment operations. It also said the large retail banks should have bigger "cushions" so they can absorb losses or survive a future financial crisis.
The commission, chaired by Sir John Vickers, called for a new system to help customers to switch current accounts through a free redirection service to be formed by September 2013 and said the sell-off of hundreds of Lloyds branches should be used to bring in a competitor.
In a Commons statement, Mr Osborne pledged that some changes would be included in a Financial Services Bill, which will put the Bank of England in charge of regulating the banks, due to become law by the end of next year.
But he hinted that the proposal on ring-fencing the retail and investments arms would require a separate Bill at a later stage because it would be too complex to include in an already weighty measure. This could provoke a battle with the Liberal Democrats, who are keen to see swift progress and may table amendments to the Financial Services Bill to implement ring-fencing more quickly.
Although the 2019 deadline was included in the Vickers report, Ed Balls, the Shadow Chancellor, accused the Government of foot-dragging. The former City minister said he was "deeply sorry" for the part he and the last Labour Government had played in the "global regulatory failure" that led to the financial crisis. Presenting his report, Sir John called on the Government to enshrine the banking reforms in law as soon as possible to make sure they were not watered down or left on the shelf. He warned against rejecting any of his proposals, claiming they worked as a package.
Sir John said: "On the question of pick and mix ... we think that would be a great mistake. We have designed this very much as a coherent package. If you take one bit away, you weaken it very greatly.
"If you start to weaken the ring fence... you can blow apart the whole point it seeks to have."Reuse content