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16th October 2012

UK banking reform advances - marginally
Opinion

The UK government issued its draft banking reform bill last Friday (12th). The draft banking reform will now go to the committee set up by the Chancellor of the Exchequer for scrutiny. The committee is chaired by Andrew Tyrie, also chair of the influential Treasury Select Committee. Tyrie will report in December.

The draft banking reform bill says nothing new - exactly as intended under a political compromise. The bill restates the recommendations of The Independent Banking Commission (IBC) chaired by Sir John Vickers made over 1 year ago. The core recommendation being the requirement for universal banks to hold separate 'ring-fenced' capital for their retail banking operations. All the decisions identified as needed to be taken by the government within the IBC report are deferred to the financial regulator or secondary legislation and are not part of this primary bill. The only purpose of the report is to give Tyrie's committee, consisting of MPs from all of the major parties, a point of reference to either agree or disagree with.

The Financial Secretary to the Treasury, Greg Clark said:
“The publication of the draft Banking Reform Bill today illustrates Government’s ongoing commitment to reforming the banking sector.

“We want to ensure that taxpayers are protected whilst retaining our status as a global financial centre. The Government remains on course to have all ICB legislation in place by the end of this Parliament.

"The Government looks forward to receiving the report of the Parliamentary Commission on Banking Standards and will consider it carefully ahead of formally introducing the Bill to Parliament in early 2013.”

The latest European Union proposals are not radically dissimilar. It would be advantageous for Britain to negotiate with the EU for a common route forward. This is unlikely to happen however as it would then lead to more criticism of ministers by the anti-European, anti EU, right wing of the government.