'Banker basher' Cable's olive branch to the City

Business Secretary Vince Cable today offered the City a truce after leading ferocious attacks on bankers.

In a major change in tone from the man who has made much of his political reputation by "banker bashing", Cable said he hoped the reshaping of the industry proposed by Sir John Vickers will allow a "line to be drawn" in the row which has raged between politicians and financial chiefs.

When the Vickers report has been implemented, banks could be treated as "normal institutions".

His comments in a fringe meeting at the Liberal Democrats' annual rally in Birmingham came after he mocked bankers in his speech yesterday.

Only a year ago, Cable was lambasting bankers as "spivs and gamblers".

Today he said: "I would like to think that now we have come to a decision... on implementing the Vickers report... that we can draw a line under lots of those controversies and move on and treat banks as normal institutions."

Retail banks will be ring-fenced and "essentially underwritten by the state" while their investment, or "casino", arms would be able to "rise and fall" like other businesses.

"We shall not have to engage in endless controversies with them any more," he added.

"I hope that's where we will finish off and we can get them back to the normal relationship with the City."

At the same event a year ago, he was warning of "a potential train crash ahead" if banks paid out large bonuses as the Government pressed ahead with spending cuts.

The Business Secretary also stressed that one of the problems of the Government's dialogue with the Square Mile was that it was heavily dominated by bankers rather than other big City professions such as accountancy, insurance and legal firms.
Another difficulty for ministers in dealing with the City, he added, is it has the "element of an enclave" with a global outlook on tax, pay and business regulations and with a "barbed wire fence" around it in relation to the domestic economy.

Lib-Dem party leader Nick Clegg warned banks this morning that they must meet the Project Merlin agreement on increasing bank lending and bonus restrictions otherwise "all bets are off".

But the Liberal Democrats have made a string of threats against the financial sector which have failed to be followed up by tough action. Clegg admitted he would have preferred a bigger crackdown on bankers' pay and bonuses, but said this had not been possible, partly due to contracts which guaranteed the payments.

Vickers' Independent Commission on Banking surprised the City when it said in its final report last week that it did not expect all its recommendations to be implemented until 2019.