George Osborne is to outline plans to reform the banking industry to Parliament despite fears it could cost the sector up to £7bn.
The chancellor will press ahead with proposals by the Independent Commission on Banking (ICB) to split the investment and retail banking arms of institutions to guard against future bailouts. However, there have been warnings the move could harm the economy and slow lending at a time when the economy is in danger of falling into recession.
HSBC and other banks could also be tempted to move their headquarters away from London, resulting in the loss of jobs and tax revenue for the UK, according to speculation.
Business secretary Vince Cable said: “We have accepted the recommendations of the commission. It is absolutely right that we make the British economy safe. We just cannot risk a repetition of the financial catastrophe we had three years ago.
“Big structural reform of the banks was something we (Liberal Democrats) fought for and argued for and now it is going to happen.”
The Treasury will publish a detailed response to the ICB report, which will be followed by the chancellor’s statement to Parliament. The report recommends forcing banks to hold more capital to help protect them from financial crises in future.
All primary and secondary legislation stemming from the report is to be enacted by the end of the current Parliament under the plans Osborne is expected to announce, while a white paper is likely to be written up in the new year. The reforms should be put in place before 2019, according to newspaper reports.
A number of bankers have urged the chancellor to water down the proposals, claiming they are unnecessary and could result in higher costs for customers.
The ICB estimates the plans will cost the Treasury between around £4bn and £7bn, but some industry sources have projected the true cost at as much as £12bn.
Former head of the Office of Fair Trading Sir John Vickers chaired the ICB, which was created by the coalition government last year to carry out a review of the banking sector.
Speaking ahead of the announcement, mayor of London Boris Johnson urged Osborne: “Just don’t kill the goose, don’t kill the goose.”
However, he added: “There’s no doubt that there’s something creepy about the huge bonuses that bankers are still continuing to receive in spite of the fact that they were effectively bailed out by the taxpayer. We all want to see them doing more for society.”
Leave a Comment