Osborne attacked for delaying bank reforms

Need for change: George Osborne
12 April 2012

George Osborne today backed historic reforms of Britain's banks but faced a backlash over delaying them for up to eight years.

The Chancellor vowed to implement sweeping changes to the City by 2019 with new laws in place by 2015.

Bank shares plunged this morning amid growing fears of a Greek default and as full details of the Independent Commission on Banking's radical
recommendations were published.

Mr Osborne praised the report drawn up by Sir John Vickers as "very impressive" and backed its implementation timetable - which was longer than had been feared in the Square Mile.

It sparked claims that the reforms were being "kicked into the long grass", with some Liberal Democrats calling for the biggest banking shake-up in more than a generation to happen sooner.

Lib-Dem peer Lord Oakeshott branded 2019 and 2015 as "bogus" dates and demanded key banking reforms should be in a Bill currently going through Parliament.

Business Secretary Vince Cable called for "rapid" progress on the Vickers' findings but accepted that there were "certain technical aspects" which should be "properly and sensibly" brought in over time.

The report also proposes a new service to make it easier for people to switch bank accounts.

The implementation row erupted as:

The eurozone was plunged into greater crisis after German warnings that Greece is heading towards default.

Economists said living standards in Britain have suffered the biggest fall for 30 years with more pain to come for up to 10 more years.

Warnings came that mortgages and other bank loans or charges could rise due to the reforms.

Business chiefs said the moves, estimated to cost £4 billion to £7 billion, could hit economic growth.

The long-awaited commission's report made a series of recommendations including the "ring-fencing" of banks' retail and investment arms, greater capital requirements of 10 per cent of loans, and loss-absorbing capacity of 17 to 20 per cent of what are called risk-weighted loans and investments.

Mr Osborne said: "The commission has done a very good job. The Government will now get on with implementing the Vickers report.

"John Vickers himself sets out a timetable and I intend to stick to his timetable."

Former Office of Fair Trading boss Sir John accepted that the shake-up could cost the financial sector up to £7 billion but denied it would harm the City.

Mayor Boris Johnson warned against imposing a "competitive handicap" on Britain's financial sector.

"If our banks are treated more harshly than those abroad, it could cause real economic hardship - the last thing we need," his office said.

Treasury sources said some of the measures could be included, "if appropriate" in the Financial Services Regulation Bill going through Parliament.

City analysts were relieved at the timescale, but Lord Oakeshott said: "The real date that matters is getting on with it now." Vince Cable is believed to see 2019 as an absolute final date.

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