Cable says banks still face "fundamental surgery"
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Business Secretary Vince Cable says banks still face “fundamental surgery” in terms of the link between investment and retail banking and the lack of competition in the sector.
In an interview on The Andrew Marr Show on BBC 1 yesterday, Cable (pictured) said the Independent Commission on Banking, chaired by Sir John Vickers, will bring structural changes within the banks.
He said: “Ultimately these problems are only going to be dealt with when we have the big structural reforms, which the Banking Commission is dealing with. In other words the whole question of getting more competition, dealing with this issue about the link between the retail banks and the investment banks; these big structural questions, which are the fundamental surgery, is to come.”
Marr asked Cable if banks will be forced to split retail and investment banking.
Cable said: “It certainly needs to be fundamentally reformed. As I say, we have this group looking at it. It is not just that problem. It is also lack of competition because in the banking crisis we now have fewer big banks and much less competition which is why the margins are so enormous. We have got to get more competition into the system too.
“I think there will have to be change and it will have to be radical.”
Marr questioned Cable about the Government’s agreement with the banks, Project Merlin, which will see Barclays, HSBC, Lloyds Banking Group, RBS and Santander make £190bn available in gross new lending to businesses in 2011. This includes £76bn for small and medium sized firms.
Under the agreement, announced last week, Barclays, HSBC, Lloyds Banking Group and RBS have also agreed to improve transparency around loan applications and remuneration. They have agreed to disclose the remuneration details of their executive directors and the five highest paid senior executives on an unnamed basis from 2010.
Marr asked Cable if he disagrees with Lord Oakeshott, who resigned over the agreement, calling it “weak and waffly”.
Cable said: “What I have suggested is that the glass is half full rather than half empty and that some of the most important things in the discussions on the banks this week took place outside of the Merlin agreement. In other words we put on more taxes because we think the banks are in a stronger position in their ability to pay more tax.
“And the Government agreed that we will have tougher legislation on disclosure, so we know how much the top people in the banks are actually paid and shareholders can make an informed decision about how much they should be paid.”
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Readers' comments (4)
Evan Owen | 14 Feb 2011 9:44 am
Banks paying their fair share of taxes? What a novel concept.
Dear Mr Cable, should the government interfere in the markets? We all know what happens when it does.
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Malcolm Bennett | 14 Feb 2011 11:24 am
Should Mr Cable (as a senior Government minister)be publicly anticipating what he wants the Independent Banking Commission to recommend? Seems to compromise their 'independent' status in my view.
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Steven Balmer | 14 Feb 2011 12:06 pm
Well done Mr Cable in publicly stating what a blind man can see. The banks do need fundamental reform, competition has been quashed by the CC and bankers are ripping off the public whenever the opportunity arises.
I do think the increase is tax is a little too stealth like. The government encouraged everyone to have a bank account which has become an essential service and as such banks should not be in a position to profit from charges as they currently do. Banks should make their profit from the services they provide and charges, mostly effecting the poorest, should be capped at the true cost created by those actions requiring a charge for additional work.
All essential services should have a cap on pay rate, those at the top could be limited to no more than 10 times the minimum income within a group. Would be draconian but damn effective and is the sort of system change which would bring about the dramatic reform needed. At the moment investment bankers are still laughing at the people whose money they gamble.
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Chris H. | 14 Feb 2011 12:24 pm
I could not agree more with Malcolm Bennett.
Danny Alexander did the same thing a few weeks back - either on AM or The Politics Show. IIRC Alexander was even more specific.
Whilst I'm a struggling saver, on principle it offends me that these two (think they) have the whole thing stitched up already. I'm surprised that neither the opposition nor the IBC have commented.
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