Labour has slammed the Government’s “half-hearted” banking reform bill for not implementing the full recommendation of the banking commission.
The Parliamentary Commission on Banking Standards called for the Treasury to have the power to force separation of all banks if the sector does not comply with new rules.
Under the bill, the Government will have the power to separate individual banks if they are judged to be flouting ringfencing rules.
During an urgent question on banking reform in the House of Commons today, shadow Treasury financial secretary Chris Leslie said banks will be “rubbing their hands with glee”.
He said: “We should be getting serious about reforms, the chancellor has fudged the chance at fully implementing the tough stance recommended by the Vickers report. Why won’t he legislate for a full reserve power of separation if ringfencing doesn’t work, something we called for last year and the committee recommended?
“Surely it would be sensible to legislate now, not just if one or two ringfencing banks misbehave but for the sector as a whole. He may think he has a cunning ploy but stopping short with only half the backstop powers just means it is unlikely to be used. Corporate lawyers will be rubbing their hands with glee at the prospect of taking on the regulator on a case by case basis.”
Labour MPs lined up to criticise the move to not fully accept the proposals. Treasury financial secretary Greg Clark said the reason for not introducing the power to force separation of all banks was opposition from Bank of England governor Sir Mervyn King.
PCBS member Labour MP Pat McFadden said: “Why was the speech silent on the PCBS recommendation for a general reserve power for the sector as a whole? This is something that should not be used by the Bank of England but the chancellor.”
Another PCBS member and Labour MP Andy Love said: “The reason for not including a reserve power does need further explanation. The chancellor said our commission ought not to unpick the consensus but having taken evidence from a wide range of sources, will the minister give serious consideration to our recommendations?”
Labour MP for Cardiff West Kevin Brennan said: “By failing to take full reserve powers the chancellor has not so much electrified the ring-fence as just raised it by a millimetre. Why weren’t the full recommendations of the commission implemented?”
Labour MP for Wirral South Alison McGovern said: “Can I try the minister yet again on full reserve powers. Why should the opinions of one institution hold sway over this expert commission?”