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 on Sunday, Cable 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 increasing comp- etition and dealing with this issue about the link between the retail banks and the investment banks. These big structural questions, which are the fundamental surgery, are to come.”
Marr asked Cable if banks will be forced to split retail and investment banking. Cable said: “It needs to be fundamentally reformed. There must be change and it will have to be radical.”
He questioned Cable about the Government’s agreement with the banks, Project Merlin, which will see Barclays, HSBC, Lloyds, RBS and Santander make £190bn available in gross new lending to businesses this year. This includes £76bn for SMEs.
Under the agreement, Barclays, HSBC, Lloyds and RBS also agreed to disclose the remuneration details of their executive directors and the five highest- paid senior executives.
Marr asked Cable if he disagrees with Lord Oakeshott, who resigned over the agreement, calling it “weak and waffly”.
Cable said: “Some of the most important things in the discussions on the banks this week took place outside of the Merlin agreement. We increased taxes because we think the banks are in a stronger position in their ability to pay more tax.
“The Government agreed that we will have tougher legislation on disclosure, so we know how much the top people in the banks are paid.”