Senior Liberal Democrats are pushing for the Independent Commission on Banking’s proposals to be introduced through the current financial services bill in a move which will increase pressure on the Government’s timetable for regulatory reform.
Last week’s ICB report called for the retail arms of universal banks to be ringfenced, operate under different corporate structures, hold more capital and dramatically increase their loss absorbing capacity.
In a statement to the House of Commons last week, Chancellor George Osborne said some of the recommendations in the Vickers report could be implemented through the financial services bill, which will create the new regulatory structure including the Financial Conduct Authority. But he said a separate bill may also be required to make sure the new financial regulators are up and running by the beginning of 2013.
However, Business Secretary Vince Cable told The Sunday Times it is “highly probable” the financial services bill will be used.
He said: “This date of 2019, when some people think the changes to the banks will take place is very misleading. It is an absolute backstop for the final pieces of the jigsaw. If you actually read the Vickers report the emphasis is on early action.”
Speaking on Sky News on Sunday, former Liberal Democrat Treasury spokesman in the Lords Lord Oakeshott said the party would be “torn to ribbons” at the next election if legislation bringing in the proposed reforms was not in place.
The draft bill is currently undergoing pre-legislative scrutiny, with the joint committee due to report on December 16. The Government has said it will respond to the Vickers report by the end of the year and legislate by 2015.
Cicero Consulting director Iain Anderson says: “The measures are aimed at making the retail banks too safe to fail but the Treasury is not going to want to fold in the ICB measures with the financial services bill because it will slow the parliamentary process down and they are already under some pressure to meet the 2013 deadline.”