The Queen's Speech: George Osborne to set out banking reforms
Wednesday 09 May 2012
Plans for a radical reform of the banking sector will be spelled out by Chancellor George Osborne ahead of his Mansion House speech next month.
The Government will press ahead with the controversial measures drawn up by the Independent Commission on Banking (ICB) to help prevent further bank bailouts, the Queen's Speech confirmed today.
The next step along the road to reform is expected to be a white paper published on June 14 to coincide with the Chancellor's speech to the City, which will form the basis of a Banking Reform Bill.
One of the main reforms will be to force banks to ring-fence their retail arms from riskier investment banking divisions.
A new rule, known as the depositor preference, will ensure ordinary savings and deposit accounts are repaid first when a bank goes under.
Other proposals include making it easier for customers to switch their account from one bank to another by September 2013 and requiring banks to increase capital reserves to make them more resilient to financial crises.
Mr Osborne has described the changes as "the most far-reaching reforms of British banking in our modern history".
They will cost the industry £3.5 billion to £8 billion a year and potentially reduce GDP by between £800 million and £1.8 billion. But he believes the costs will be far outweighed by the benefit of avoiding future financial crises, which he said would reach £9.5 billion a year on "modest" assumptions.
The ICB, chaired by Sir John Vickers, delivered its report in September and the Government has been consulting on the plans since December when it accepted the findings.
The Queen's Speech comes days after Bank of England governor Sir Mervyn King said it was vital that the Government pressed ahead with the reforms sooner rather than later.
Given the complexity of the plans it is understood that the legislation may not hit the statute books until 2014 and the laws will not be fully implemented until 2019.
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