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Liberal Democrat News 23rd December 2011

December 23, 2011 11:02 AM
Originally published by UK Liberal Democrats


Making UK banks safer


Business Secretary Vince Cable confirmed this week that the Coalition government is now committed to implementing the Vickers report recommendations in full, in line with the timing suggested by that report.

The Coalition set up the Vickers Commission, as advocated by Vince, to deal with the unsafe structure of UK banking. It reflected a long-standing Liberal Democrat criticism of banking that caused: financial instability - the biggest financial crisis of modern times; unfairness - pay and bonuses reaching record levels; and inefficiency - credit failing to reach the productive parts of the economy.

Vickers was a vital part of the Coalition response to Labour's financial crisis, alongside reform of financial regulation, a permanent Bank Levy (raising more each year than Labour's Bonus Tax), and the most transparent pay regime of any major financial centre.



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The Vickers measures include:

Ringfencing:

  • The primary and secondary legislation required for ring-fencing essential financial services from risky investment banking will be in place by 2015
  • Our reforms make ring-fenced banks safer. If they do fail, the situation can be easily resolved without putting the economy at risk
  • Ordinary depositors money isn't subsidising risky investment banking
  • Banks to start implementing the reforms in 2015 - the last aspects of the reforms will be done by 2019.

Capital

  • Banks must issue far more loss-absorbing capital than before, and more than international standards require them to have, meaning less risk to taxpayers


Competition

  • Banking will be made genuinely competitive by making it easier to switch accounts; making bank regulation a driver of new competition; the creation of a powerful new entrant to banking - the Co-op is buying 600 Lloyds-HBOS branches


"We're going further than any other major country in the European Union - or the United States - to make our banking system safe by separating the retail and personal lending from the casino banking," said Vince. "Britain is much more exposed to a banking crisis than any other major country - the balance sheet of the banks is about 500 per cent of British GDP. That's extraordinarily large, that's where we've got to act."

Co-chair of the Lib Dem Parliamentary Treasury Committee, Stephen Williams said:

"Vince was the voice of reason when the financial crisis almost broke the country three years ago. Now, he and the Liberal Democrats have worked to put British banks on a sound footing and limit the risk to the taxpayer of any future banking problems."