Labour brand George Osborne and Vince Cable 'weak' as key reforms to banking system are thrown out

Ministers reject several recommendations of the commission set up to prevent future bailouts

Government plans to reform banks came under sustained attack on Monday night as ministers opted to ignore some of the key recommendations of the Parliamentary Commission into Banking Standards that it set up.

In an 80-page response, the Chancellor, George Osborne, and Business Secretary, Vince Cable, offered only a partial endorsement of the commission's exhaustive report, and were immediately attacked as "weak" by Labour.

Andrew Tyrie, the Conservative chairman of the multi-party commission, said: "On an initial reading, the Government's response appears to fall short on a number of important points, including the leverage ratio, proprietary trading, improving the governance of the Bank of England and reform of the Financial Conduct Authority's objectives. Only when the Government's formal amendments have been laid before Parliament will we be able to assess them."

Mr Tyrie also rounded on amendments put forward to the commission's plans to electrify the ring fence around retail banks by giving regulators the power to break up those that seek to break through it. He said they had in effect rendered electrification "useless" and demonstrated an urgent need "to remain vigilant".

Mr Tyrie said the industry had cost the country "a fortune". And he said: "I hope their lordships will repair some of the damage."

Andy Love, a Labour member of the commission, asked whether the Government had "electrified the ring fence enough" and suggested that banks needed "encouragement" to live by it.

And Chris Leslie, shadow Financial Secretary to the Treasury, called for a "more rigorous, thorough" review of ring fencing that would draw upon independent experts. "There is a danger of regulators marking their own exam paper if the job is left to the Prudential Regulation Authority," he warned.

Top executives are, however, set to face jail if they recklessly run a bank into the ground, with a new offence set to be created. Other key recommendations that the Government will accept include the introduction of a regime governing the behaviour of senior bank staff and new rules to promote higher standards for all bank staff. The burden of proof when regulators bring charges against senior bankers will also be reversed.

However, the list of recommendations that were rejected included the call for the scrapping of UK Financial Investments, which manages the taxpayers' stake in banks, and proposals to strengthen banks by tightening the so called "leverage ratio", a measure of capital strength.

In the City, reaction was one of relief. Shares in the big UK banks finished up, with Barclays closing up 7.1p at 298.6p, Lloyds ahead 2.47p at 67.1p, Royal Bank of Scotland up 12.1p at 288.8p, and HSBC higher by 4.9p at 717.4p.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk