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Categories:Politics

Govt banking reforms will need 'tough' regulators

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London UK Parliament 480

Experts are warning the success of the Government’s banking reforms will rest on “tough” regulators who are not “frightened” to take on the banks.

The Government unveiled its banking reform bill this week, setting out plans to ringfence the retail arms of UK banks from their investment divisions as recommended by Sir John Vickers’ Independent Commission on Banking.

It also partially adopted a recommendation by the Parliamentary Commission on Banking Standards which called for the Treasury to have the power to force separation of all banks if the sector does not comply with the new rules. Instead, it gave the Bank of England the reserve power to separate individual banks if they “game the system”.

Former FSA head of training and competency and Ethical Foundation founder David Jackman says: “There needs to be an effective deterrent as banks will always find a way of gaming regulations, which was my experience at the FSA.

“The success of these reforms will mainly be down to the attitude of the two regulators. We need the PRA and FCA to not be frightened of the banks.”

Social Market Foundation director Ian Mulheirn says: “The biggest concern is how the reserve power will be triggered. People forget the boom-time mentality and one of my concerns is that this new power is based on the omniscient regulators and experts. There needs to be something of a rule-based system around it.”

Lansons Communications director Richard Hobbs said: “The power is like a nuclear warhead, you never want to use it so regulators will need to face people down and be tough.”

Shadow Treasury financial secretary Chris Leslie attacked the reforms as “half-hearted”, saying banks will be “rubbing their hands with glee” at the new limited powers.

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Readers' comments (2)

  • So, what we have is a big, bad, tough, nasty, monumentally expensive and unaccountable regulator that tackles with relish the task of beating up the little guys (because, as Tracey McDermott has admitted, we're an easy target), but obviously the FSA isn't nor ever has been up to the task of taking on the banks.

    What a great country we live in.

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  • @ Julian
    Julian I usually agree with you, however, the FSA are and always have been perfectly capable of taking on the banks. They simply did not want to jeopardize their future employment, with eye watering salaries, opportunities.Hence the need to bully the little guys-this made the government and the public think that the fsa is a worthwhile organisation, rather than the unelected, unaccountable, cash guzzling leviathan, it really is.

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