James Moore: Radical reforms are just what we wanted but don't bank on them sticking

Outlook, plus: Recovery in air is no cue for return to light touch

Reckless bankers face jail! It sounds tough, doesn't it? Just the sort of radical reform we need after the grievous damage their industry did to this country. That was the headline that the Chancellor, George Osborne, and the Business Secretary, Vince Cable, wanted yesterday as they published their 80-page response to the Parliamentary Commission on Banking Standards.

Many of its recommendations were, at least in theory, accepted. But before you start thinking that we shall indeed see the shake-up that this industry so badly requires, cast your mind back to the electrified fence that was supposed to be put up around the money we leave on deposit with banks. Fortifying the ring fence proposed by Sir John Vickers' Independent Commission on Banking with a charge was the key recommendation of the first report of the Parliamentary Commission on Banking Standards.

To achieve this, it wanted to give regulators the power to break up banks that attempted to "game" or chip away at the fence. This was designed to head off the possibility of banks being allowed to backslide into bad habits when profits are again flowing freely and the economy is on the path to a sustainable recovery. A time when politicians might be tempted to start listening to the lobbyists who have been urging them to rein in those nasty watchdogs who keep jumping on the banks, thus (allegedly) restricting economic growth.

The Treasury was to be given an ultimate veto, but the idea was that the decision of whether to go ahead with investigating a break-up would be in the hands of regulators. Now, despite proclaiming its support for the measure at the time, the Treasury has steadily chipped away at it. Far from having veto power, it wants ministers and officials involved at several stages of the process.

As such, political considerations will come into play at an early stage. There may be an electric fence around retail deposits. But it doesn't look as if the current will ever be turned on.

Which brings us to yesterday's final report. Perhaps it was always a stretch to see the Government accepting every recommendation of the Commission (although it should have).

As a result, for example, UK Financial Investments, the discredited body set up allegedly with the intention of keeping ministers at arm's length from the state's shareholding in banks, lives on. It yesterday made a new hire in the form of the senior banker Christopher Fox, who will be charged with looking after the bad loan books of Northern Rock and Bradford & Bingley. Coming from UBS, he ought to know a thing or two about bad loans.

There will be a review into whether to spin a "bad bank" out of Royal Bank of Scotland, but it will not consider the Archbishop of Canterbury's suggestion that Fred Goodwin's creaking edifice be split into a number of smaller regional banks. And there's more like these examples in the guts of the Government response.

Even when it comes to the measures that were accepted, and the bleating was under way yesterday from the City, there are no guarantees. An awful lot depends on the drafting of the legislation.

Interestingly, banking shares were on the march yesterday. That tells you a lot.

It will be a while before we truly know how much watering down of those recommendations that have been accepted is even now under way. But the chances are that bank executives will be sleeping reasonably comfortably as their lobbyists get to work. Would that were the case for those of us with money on deposit. When you hear the Government hailing the Commission's report, just remember what has happened to that electric fence.

Recovery in air is no cue for return to light touch

There were further signs yesterday that the economy may be inching towards something like a recovery.

The junior Alternative Investment Market, where young and fast-growing companies can hope to find funds (that is if they don't get lost among a forest of trashy overseas resources companies with dubious governance) saw a small flotilla of listings.

Then there was one of those surveys (from the accountancy firm BDO this time) suggesting that economic confidence is growing, which is important because it might mean that businesses feel confident enough to start investing the mountains of cash they are sitting on.

Perhaps dovetailing with that, another report, this time from KPMG on jobs, had recruitment at a two-year high.

Capital Economics was even moved to talk of the UK preparing to enjoy a long-overdue bounceback in the form of strong "catch-up growth". There's quite a lot of catching-up to be done, given the underwhelming performance of UK plc in the past couple of years.

All these various bits and pieces were noticed in the City. Shares rose. Even the pound, languishing at a four-month low against the dollar and the euro, inched off a floor on which it had been languishing since Mark Carney, the incoming Governor of the Bank of England, indicated that the current historically low interest rates will be in place for a while yet.

Happy days then, and if all this amounts to more than just a flash in the pan, the Coalition will be crowing, although we might now ask whether this happy situation could not have been achieved without attacking the most vulnerable in society.

We might also consider that, with the economy finally showing signs of recovery, now is exactly the sort of time the banks and their allies will question the reforms which have been put in place, arguing that they are not needed and, indeed, that they damage growth. That perhaps a lighter touch from the regulators would be in order. Such as that which did such a wonderful job during the Noughties perhaps?

Suggested Topics
News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
sportColombian World Cup star completes £63m move to Spain
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
News
news
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

Michael Jamieson: Why weight of pressure rests easy on his shoulders

The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn