Leading article: Osborne must show his hand


There is widespread agreement that reform of British banking is essential and overdue and that it should start with the separation of so-called high street business from the kind of speculative, "casino" adventures that have landed them in so much trouble recently. The report by Sir John Vickers, which is published today, is welcome, therefore, in calling for the two activities to be ring-fenced from one another.

Preferably, the report would have recommended the total separation of the two activities. This is because ring-fencing still leaves open the possibility of banks stealthily dismantling the internal demarcation over time.

Given that, ring-fencing is greatly preferable to what we have now: banks so big that they know they cannot be allowed to fail lest they pull down millions of small savers with them. The current safety net that these behemoths enjoy has been a disaster for them as well as us, fostering a culture of complacency and recklessness. What it has meant in practice is that the banks reap big profits and liberally hand out bonuses when the times are good, confident that when times are bad the taxpayer will step in and bail them out. Heads they win, tails taxpayers lose.

The reaction of the Coalition Government to the report will be the key test – not in terms of whether Sir John's proposals are bathed in warm words of welcome but whether they are acted on with speed. The response of the Chancellor, George Osborne, will be crucial. He is known to be less enthusiastic about demarcation within the banks than the Business Secretary, Vince Cable.

Those who don't want real change will be careful to make the right-sounding pleasantries about the report while calling for enactment of its recommendations to be pushed back for a few years. The excuse will be that the banks need more time to adjust.

The Government should present a united front and not heed this predictable clamour from the banks and their friends. It should make it clear that the report's main proposals will be put into law within the lifetime of this parliament. Anything less than wholehearted commitment will show that the Chancellor, in particular, is not serious about banking reform.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Java Developer - web services, XML and API

£330 - £350 Per Day: Clearwater People Solutions Ltd: Our client based in Lond...

Maths Teacher

Negotiable: Randstad Education Reading: Maths Teacher required to teach Furthe...

Primary teachers required for schools in Norwich

£21000 - £35000 per annum: Randstad Education Cambridge: Primary teachers requ...

Trainee Helpdesk Analyst / 1st Line Application Support Analyst

£18000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Day In a Page

Read Next
Brooks Newmark  

If Brooks Newmark is ‘sick’ what does that say about the rest of us?

Simon Kelner
Adiala Jail in Rawalpindi where Mohammad Asghar is being held  

Mohammed Ashgar: A Briton on death row in Pakistan who the Government must act to save

David Morrisey
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style