Labour Treasury spokesman Lord John Eatwell says the Government’s banking reforms are too complex and must be simplified.
Last month, the Government published its banking reform draft bill based on Sir John Vickers’ Independent Commission on Banking recommendations, which plans to ring-fence banks’ retail arms from their investment business.
Speaking at the Tax Incentivised Savings Association annual conference in London last week, Eatwell said the reforms make the regulatory framework more complex.
He said: “Complexity is the enemy of a future stable financial system but our regulatory system is becoming more complex, it is going in the wrong direction.
“Banking regulation has to be simple. If we are committed to banks that are not too complex to manage and not exposing households and small and medium sized businesses to excessive risk then we must have simple banking reforms such as the Glass-Steagall reforms in the US rather than Sir John Vickers’ proposals.
“Unfortunately the Government is already making the reforms more complicated by allowing derivative instruments to be sold within the ring-fence.”
Eatwell also encouraged the creation of simple products.
Former FSA director and Lloyds Banking Group risk directior Carol Sargeant is currently leading a Treasury steering group on the development of simple financial products.
Lansons Communications head of regulatory consulting Richard Hobbs says: “There is no political desire to keep the financial rulebook in a healthy state. No one is sweeping up the dead wood of old regulations that create the complexity.”