Banking reform unlikely till at least 2015 over fears it could stall economy

1st September 2011

The Daily Telegraph reported that less than two weeks before Sir John Vickers is due to make public the final report of the ICB, senior politicians and financiers are concerned that its recommendations could imperil Britain's banks.

Andrew Tyrie MP, chairman of the Treasury Select Committee, told The Telegraph he was "worried that pushing banks to take on more expensive funding could damage them at a time when they are ill-equipped to deal with it.

"Now is not the time to implement liquidity requirements that are above those proposed internationally," said Mr Tyrie.

Earlier this week the Business Secretary Vince Cable played down talk of a government divide over banking reform.

The Guardian reported how a row had erupted after Mr Cable said banks were being disingenuous in saying that reform now would derail recovery.

It adds that any delays will open up the government to accusations of capitulating to the powerful banking lobby, which is opposed to looming rules that will split banks' deposit-taking units from their riskier investment banking operations.

The IBC, under Sir John Vickers, has had a year to consider banking reform to prevent another financial crisis. Its interim report in April disappointed critics who argued for a total split of retail banks from the investment banking divisions.

David Hillman of the Robin Hood Tax campaign told the Guardian: "We must not be deterred by bank lobbyists whose idea of 'economic recovery' means increasing profits."

The Financial Times (paywall) reported there was now "a political consensus that they should focus on business lending to sustain the faltering economy".

It adds: "Vince Cable, the cabinet's most vocal bank critic, has accepted it may be impossible to implement extensive banking reforms before the election, according to government officials, although the legal framework for the changes would be put in place before the poll.

"The Treasury has insisted no decisions on implementing the Vickers recommendations would be taken until after ministers had studied its proposals, with final decisions on the scope and timing of banking reforms to be announced before Christmas."

On the Telegraph's comment boards , readers were rounding on the goverment over the planned delay of reform.

Blofeld's Cat writes: " Perhaps a government statement that they will not, under any circumstances, be bailed out by the taxpayer, would focus the banks' collective minds. Nothing is "too big to fail" and the cemeteries are full of "irreplaceable" people."

spareusthelies adds: "Don't forget right now it is the Politicians who need to step up to the plate and take the necessary action! If the politicians do what they always do and WEASEL out of taking that action, that is hardcore evidence of their TOTAL FAILURE. Such failure is deserving of nothing less than harsh and exacting punishment from the people!

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