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Banking reforms 'may not happen until 2015' Banking reforms 'may not happen until 2015'
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Any shake-up of British banks may not come into force for several years, government sources have indicated.Any shake-up of British banks may not come into force for several years, government sources have indicated.
Although legislation could be passed to "split up" leading banks before 2015's scheduled general election, changes may not take effect until after that date.Although legislation could be passed to "split up" leading banks before 2015's scheduled general election, changes may not take effect until after that date.
Business Secretary Vince Cable has said changes will go ahead despite the plans coming under fire from business. Business Secretary Vince Cable has said changes will go ahead and denied any splits with the Tories on the issue.
The CBI said taking action now could starve businesses of the capital they needed and damage the recovery.The CBI said taking action now could starve businesses of the capital they needed and damage the recovery.
But Mr Cable said that suggestion was "disingenuous in the extreme". But Mr Cable said that suggestion was "disingenuous in the extreme" and accused bankers of "trying to create a panic about something they know has got to happen".
Ensuring taxpayers are not liable for any future losses or bank collapses, and ring-fencing banks' retail operations, are among the proposals.Ensuring taxpayers are not liable for any future losses or bank collapses, and ring-fencing banks' retail operations, are among the proposals.
'Creating a panic' 'Press ahead'
Anxieties about the big financial institutions were "all the more reason for grappling with this issue", Mr Cable told The Times.
The Liberal Democrat minister said: "It is disingenuous in the extreme to use the current context to argue against reform.
The tussle between the banks and the business secretary is more than just another bout of political fisticuffs between Mr Cable and those he once dismissed as "spivs and gamblers".The tussle between the banks and the business secretary is more than just another bout of political fisticuffs between Mr Cable and those he once dismissed as "spivs and gamblers".
The stakes for the government over banking reform are dangerously high.The stakes for the government over banking reform are dangerously high.
If ministers decide to delay the reforms - as demanded by the banks - and there is another banking crisis, then the electoral repercussions could be devastating.If ministers decide to delay the reforms - as demanded by the banks - and there is another banking crisis, then the electoral repercussions could be devastating.
On the other hand, if ministers decide to ignore the banks' warnings and press ahead quickly, and this then results in bank lending faltering, the consequences for the coalition could be equally serious.On the other hand, if ministers decide to ignore the banks' warnings and press ahead quickly, and this then results in bank lending faltering, the consequences for the coalition could be equally serious.
No wonder then that within Whitehall, ministers are still undecided about how fast to move on reform and whether to legislate before the next election.No wonder then that within Whitehall, ministers are still undecided about how fast to move on reform and whether to legislate before the next election.
"Banks are in a way trying to create a panic around something which they know has got to happen.
"The governor of the Bank of England and many other people have been arguing that we have to deal with the too-big-to-fail problem.
"We can't have big global banks with balance sheets bigger than British GDP underwritten by the taxpayer; this can't go on and it has got to be dealt with."
The Independent Commission on Banking's final recommendations are due on 12 September.The Independent Commission on Banking's final recommendations are due on 12 September.
In its interim report published in April, the commission - chaired by former Bank of England chief economist John Vickers - recommended ring-fencing banks' retail operations from their investment banking arms.In its interim report published in April, the commission - chaired by former Bank of England chief economist John Vickers - recommended ring-fencing banks' retail operations from their investment banking arms.
It also said that taxpayers should not be liable for future losses, and that depositors should get their money back before creditors.It also said that taxpayers should not be liable for future losses, and that depositors should get their money back before creditors.
But Mr Cridland told BBC Radio 4's Today programme there had been "a radical slowdown" in the economy since that interim report and there was now real concern about the impact of any reform. Mr Cable told the BBC that the "uncertainty and instability in financial markets make it all the more necessary that we press ahead to make our banks safe and reform them".
"We're going to have a major problem if growth stagnates, and at that point, my businesses being able to get cash from their banks is critical," he said. Amid reports of disagreements between the Lib Dem and Conservative coalition partners over the pace of change, Mr Cable said he was "more conscious of areas of agreement" and he and Chancellor George Osborne shared "common ground" over the need to take the Vickers proposals forward.
But earlier, the CBI told BBC Radio 4's Today programme there had been "a radical slowdown" in the economy since that interim report and there was now real concern about the impact of any reform.
"We're going to have a major problem if growth stagnates, and at that point, my businesses being able to get cash from their banks is critical," John Cridland, its director general said.
"Anything which makes it harder for banks to keep the wheels of the economy well-oiled is not good timing.""Anything which makes it harder for banks to keep the wheels of the economy well-oiled is not good timing."
'Risking recovery''Risking recovery'
The Vickers commission was set up by the government last June to review the UK banking sector after it bailed out some of the UK's biggest banks during the 2008 financial crisis.The Vickers commission was set up by the government last June to review the UK banking sector after it bailed out some of the UK's biggest banks during the 2008 financial crisis.
The government is under no obligation to implement the Vickers recommendations.The government is under no obligation to implement the Vickers recommendations.
The BBC's Chief Political Correspondent Norman Smith said he sensed the government was "backing off" implementing any changes for some time and the banks would be given the "breathing space" they have been calling for to build up their financial strength after the 2008 crisis.The BBC's Chief Political Correspondent Norman Smith said he sensed the government was "backing off" implementing any changes for some time and the banks would be given the "breathing space" they have been calling for to build up their financial strength after the 2008 crisis.
Prime Minister David Cameron said the government wanted to wait for the full report before responding to its recommendations.Prime Minister David Cameron said the government wanted to wait for the full report before responding to its recommendations.
"I think the key thing we want from our banks is really two things," he said."I think the key thing we want from our banks is really two things," he said.
"First of all, to be lending into the real economy so we can support growth and jobs. But the second thing we do need to make sure that our banks are not taking risks that put the economy at risk.""First of all, to be lending into the real economy so we can support growth and jobs. But the second thing we do need to make sure that our banks are not taking risks that put the economy at risk."
British Bankers' Association chief executive Angela Knight said banks should be allowed to "finance the recovery first, pay back the taxpayer next", and only then set about reform.British Bankers' Association chief executive Angela Knight said banks should be allowed to "finance the recovery first, pay back the taxpayer next", and only then set about reform.
"If more regulation remains at the top of the list, then this will only have the affect of risking the recovery which is so essential to our future," she said."If more regulation remains at the top of the list, then this will only have the affect of risking the recovery which is so essential to our future," she said.
But one financial expert said pressing ahead with changes now need not be a problem if the correct framework was introduced. National interest
"If you have the right sort of reforms... which in this case ought to be means of making it easier for banks to be allowed go bust safely without causing problems for taxpayers or the wider economy, you should introduce them at the earlier possible opportunity," said Andrew Lilico, from financial consultancy Europe Economic. But one financial expert said moving ahead with changes now need not be a problem if the correct framework was introduced.
"If you have the right sort of reforms...which in this case ought to be means of making it easier for banks to be allowed go bust safely without causing problems for taxpayers or the wider economy, you should introduce them at the earlier possible opportunity," said Andrew Lilico, from financial consultancy Europe Economic.
For Labour, shadow Treasury minister Chris Leslie urged ministers to "get a grip" on the issue.
"The choked-off recovery we've seen since George Osborne's spending review and VAT rise should not be an excuse for ducking the necessary reforms," he said.
"And nor should rows between senior Cabinet ministers, and coalition politics, nor lobbying by the banking industry, stand in the way of delivering banking reforms that are in the national interest."