Osborne to support banking shake-up
Sunday 18 December 2011
Chancellor George Osborne is tomorrow set to push ahead with radical
plans to shake up the banking industry despite fears they will harm the
A report by the the Independent Commission on Banking (ICB) that proposed lenders should be forced to split their retail and investment banking arms to help prevent future bailouts is expected to be broadly backed by the Chancellor.
Business Secretary Vince Cable today told the BBC's Andrew Marr Show that the banking industry was set for "big structural reform", although it is still not clear whether the proposals will be watered down in the face of pressure from the industry.
With the reforms estimated to cost the industry up to £7 billion, there are fears they will slow lending at a time when the economy is in danger of sliding into recession.
And the moves will heighten speculation that banks, particularly HSBC, will move their head offices away from London, depriving the UK of jobs and tax revenues.
Mr Cable told the programme: "The Chancellor and I set up this commission originally and we have worked together and come to a common view. We have accepted the recommendations of the commission.
"It is absolutely right that we make the British economy safe. We just cannot risk a repetition of the financial catastrophe we had three years ago.
"Big structural reform of the banks was something we (Liberal Democrats) fought for and argued for and now it is going to happen."
The Treasury is tomorrow expected to publish an 80-page paper outlining its response to the report published in September, according to the Sunday Telegraph.
In a Commons statement scheduled for 3.30pm, Mr Osborne will pledge to enact all primary and secondary legislation stemming from the report by the end of the current Parliament, with a white paper expected next year, the newspaper added. The reforms should be in place by 2019.
The Chancellor has come under pressure to water down the proposals, which also include plans to force banks to set aside more cash to cushion the blow of potential losses or future financial crises.
The Treasury is expected to confirm the ICB's estimate that the plans could cost banks between £4 billion and £7 billion, although industry sources have claimed the true cost could be as high as £12 billion.
It is expected that the Treasury's report will not go as far as spelling out how the ring-fence will work in practice and will leave the detail to regulators.
The ICB, chaired by Sir John Vickers, former head of the Office of Fair Trading, was set up by the coalition Government last year to conduct a full review of the sector after the financial crisis four years ago left banks including Royal Bank of Scotland and Lloyds needing bailouts.
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