Chancellor George Osborne will today warn banks they risk being broken up unless they comply with new rules to ringfence their retail and investment operations.
A report in the Financial Times says Osborne has bowed to political pressure over an “electrified” ringfence and will give regulators the power to break up banks which try to undermine the new rules.
Andrew Tyrie’s Parliamentary Commission on Banking Standards proposed an electrification of the ringfence, including back-up regulatory powers to force banks to fully separate their retail operations from their investment arms, as part of its report published before Christmas. It was originally thought the Government would reject or water-down Tyrie’s proposals but the FT report suggests the Government has now agreed to the plans.
The British Bankers’ Association argued the move would make it harder for banks to raise capital and would create “uncertainty for investors”.
Today the Banking Reform Bill will be published, setting up a ringfence around high-street retail banking, as recommended by the Vickers report, to protect it from riskier investment baking operations.
According to the FT, Osborne will today say: “My message to the banks is clear: if a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether – full separation, not just a ringfence.”