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Banking reform proposals outlined Banking reform proposals outlined
(about 1 hour later)
Opposition parties are setting out details of how they would regulate the UK banking system.Opposition parties are setting out details of how they would regulate the UK banking system.
The Conservatives want to give the Bank of England more regulation powers, but also want to curb the personal power of the Bank's governor.The Conservatives want to give the Bank of England more regulation powers, but also want to curb the personal power of the Bank's governor.
They would give responsibility for supervising financial institutions to a new financial policy committee.They would give responsibility for supervising financial institutions to a new financial policy committee.
Meanwhile, the Liberal Democrats say taxpayer-owned Lloyds and Royal Bank of Scotland should be broken up.Meanwhile, the Liberal Democrats say taxpayer-owned Lloyds and Royal Bank of Scotland should be broken up.
Liberal Democrat Treasury spokesman Vince Cable is expected to argue that large, failed UK banks are the "financial equivalent" of the Chernobyl nuclear disaster.Liberal Democrat Treasury spokesman Vince Cable is expected to argue that large, failed UK banks are the "financial equivalent" of the Chernobyl nuclear disaster.
Earlier this month, Chancellor Alistair Darling said banks would have to hold more capital and announced plans to strengthen regulation.Earlier this month, Chancellor Alistair Darling said banks would have to hold more capital and announced plans to strengthen regulation.
He intends to set up a new Council for Financial Stability, which would see the FSA, the Bank of England and the Treasury meeting regularly and reporting on the systemic risks to financial stability. The government intends to set up a new Council for Financial Stability, which would see the FSA, the Bank of England and the Treasury meeting regularly and reporting on the systemic risks to financial stability.
Consumer protectionConsumer protection
The BBC's business editor Robert Peston says the Tories' proposals are "hugely significant".The BBC's business editor Robert Peston says the Tories' proposals are "hugely significant".
Giving the Bank of England power to regulate individual banks totally enfeebles the Financial Services Authority (FSA), he says.Giving the Bank of England power to regulate individual banks totally enfeebles the Financial Services Authority (FSA), he says.
Its proposed financial committee, which would include independent appointees, would have tools to rein in bank lending.Its proposed financial committee, which would include independent appointees, would have tools to rein in bank lending.
It [the City] needs 'tough love', not the freedom to run amok Vince Cable, Liberal Democrat Treasury spokesman href="/2/hi/business/8158348.stm">Tory financial plans It [the City] needs 'tough love', not the freedom to run amok Vince Cable, Liberal Democrat Treasury spokesman href="/2/hi/business/8158348.stm">Robert Peston's analysis of Tory financial plans
The Tories, in their 52-page "plan for sound banking", also propose a raft of measures to protect and empower consumers.The Tories, in their 52-page "plan for sound banking", also propose a raft of measures to protect and empower consumers.
These would include transforming the rump of the current FSA into a consumer protection agency and also forcing banks to give consumers more useful information on what they charge.These would include transforming the rump of the current FSA into a consumer protection agency and also forcing banks to give consumers more useful information on what they charge.
But Treasury minister Lord Myners called the proposals "window dressing that ignore the failures that led to the global financial crisis". But Treasury minister Lord Myners said the proposals "shuffle chairs around" and accused Mr Osborne of showing "considerable naivete".
"While George Osborne talks about who's in charge, we are focused on the lessons of the crisis, including greater scrutiny of the shadow banking sector and a crackdown on excessive City bonuses. "It puts a person [the governor of the Bank of England] in charge who doesn't want to be in charge," he said.
"The Tory proposals would abolish an independent, expert regulator, while diverting attention from banks that took excessive risks that led to this crisis." "George Osborne is going to cause considerable disruption if he is ever given the opportunity to implement these plans."
'Not hostile''Not hostile'
Meanwhile, Mr Cable told the BBC that while he agreed with the Conservatives on the basic issue of economic management, he accused them of being "obsessed by moving around bureaucratic furniture". Instead we need to focus on the way regulation works, he said. Meanwhile, Mr Cable told the BBC that while he agreed with the Conservatives on the basic issue of economic management, he accused them of being "obsessed by moving around bureaucratic furniture". Instead, it was necessary to focus on the way regulation works, he said.
Mr Cable will use a speech later to argue that major reform is needed to make banks less of a r threat to the UK economy. Mr Cable will use a speech later to argue that major reform is needed to make banks less of a threat to the UK economy.
He will tell the London Stock Exchange he believes there is a long-term role for state banking, and will argue the banks in which taxpayers have a stake should be broken up into smaller parts before being returned to private ownership.He will tell the London Stock Exchange he believes there is a long-term role for state banking, and will argue the banks in which taxpayers have a stake should be broken up into smaller parts before being returned to private ownership.
Mr Cable will also call for highly-paid bankers to publish details of their pay and bonuses and will repeat his calls for the FSA to keep its role as banking regulator.Mr Cable will also call for highly-paid bankers to publish details of their pay and bonuses and will repeat his calls for the FSA to keep its role as banking regulator.
"Some aspects of the financial services industry are simply too big for the British economy to manage safely," he will say."Some aspects of the financial services industry are simply too big for the British economy to manage safely," he will say.
"The large, failed, British banks are the financial equivalent of Chernobyl. Like the former Soviet Union, the UK became over-reliant on dangerous financial reactors.""The large, failed, British banks are the financial equivalent of Chernobyl. Like the former Soviet Union, the UK became over-reliant on dangerous financial reactors."
To prevent Britain from becoming the next Iceland, "radical safety measures" were needed, he will argue. To prevent Britain from becoming the next Iceland, "radical safety measures" are needed, he will argue.
"My approach to the City is not one of hostility, or of obsequiousness. I recognise its importance."My approach to the City is not one of hostility, or of obsequiousness. I recognise its importance.
"But it needs 'tough love', not the freedom to run amok.""But it needs 'tough love', not the freedom to run amok."