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| George Osborne backs bank break-up powers | George Osborne backs bank break-up powers |
| (35 minutes later) | |
| The UK's big banks will be broken up if they fail to follow new rules to ring-fence risky investment operations from High Street outlets, Chancellor George Osborne has announced. | |
| He has said taxpayers are angry at banks' behaviour and will never again be expected to bail them out. | He has said taxpayers are angry at banks' behaviour and will never again be expected to bail them out. |
| His speech comes on the same day the government introduces its Banking Reform Bill in Parliament. | His speech comes on the same day the government introduces its Banking Reform Bill in Parliament. |
| Customers will also be able to switch bank accounts to a rival within a week. | Customers will also be able to switch bank accounts to a rival within a week. |
| Mr Osborne also said the banking system was not working for its customers, particularly small businesses and individuals. | Mr Osborne also said the banking system was not working for its customers, particularly small businesses and individuals. |
| He pointed to the fact that large banking transactions could be done instantly, whereas small businesses could wait days for money to pass through the system. | He pointed to the fact that large banking transactions could be done instantly, whereas small businesses could wait days for money to pass through the system. |
| Mr Osborne had previously warned against "unpicking the consensus" over structural reform of the sector. | Mr Osborne had previously warned against "unpicking the consensus" over structural reform of the sector. |
| But the chancellor appears now to have accepted a major recommendation of last year's Parliamentary Commission on Banking Standards which called for a reserve power to "electrify the ring-fence" if banks did not implement reforms. | But the chancellor appears now to have accepted a major recommendation of last year's Parliamentary Commission on Banking Standards which called for a reserve power to "electrify the ring-fence" if banks did not implement reforms. |
| The Independent Commission on Banking, led by Sir John Vickers in 2011, had concluded that ring-fencing was the best way to protect "core" retail banking activities from any future investment banking losses. | The Independent Commission on Banking, led by Sir John Vickers in 2011, had concluded that ring-fencing was the best way to protect "core" retail banking activities from any future investment banking losses. |
| 'Greed' | 'Greed' |
| Mr Osborne said in his speech, at JP Morgan's administration offices in Bournemouth, that banks had failed to take responsibility for their actions and people were still angry, five years after the financial crisis. | Mr Osborne said in his speech, at JP Morgan's administration offices in Bournemouth, that banks had failed to take responsibility for their actions and people were still angry, five years after the financial crisis. |
| The 2008 crisis, which marked the start of the credit crunch, saw the government use £65bn of public money propping up Royal Bank of Scotland and Lloyds Banking Group. | The 2008 crisis, which marked the start of the credit crunch, saw the government use £65bn of public money propping up Royal Bank of Scotland and Lloyds Banking Group. |
| Mr Osborne also referred to greed and corruption over banks' rigging of the Libor interest rate, but said that staying angry about bankers' behaviour would not fix the system. | Mr Osborne also referred to greed and corruption over banks' rigging of the Libor interest rate, but said that staying angry about bankers' behaviour would not fix the system. |
| Recklessness by banks' so-called "casino operations" was blamed for dragging the financial system to the brink of collapse. The reputation of banks has been further undermined by scandals such as the mis-selling of payment protection insurance and the rigging of the Libor interest rate. | Recklessness by banks' so-called "casino operations" was blamed for dragging the financial system to the brink of collapse. The reputation of banks has been further undermined by scandals such as the mis-selling of payment protection insurance and the rigging of the Libor interest rate. |
| Under the reforms, investment and High Street banks will also have different chief executives. | Under the reforms, investment and High Street banks will also have different chief executives. |
| Less money | Less money |
| "When the [financial] crisis hit, the fire was then so great that the whole economy was sacrificed to put it out," Mr Osborne said. "The British people need to know that lessons have been learnt. And they have." | "When the [financial] crisis hit, the fire was then so great that the whole economy was sacrificed to put it out," Mr Osborne said. "The British people need to know that lessons have been learnt. And they have." |
| He said his predecessor Alastair Darling felt he had no option but to bail out Royal Bank of Scotland. | He said his predecessor Alastair Darling felt he had no option but to bail out Royal Bank of Scotland. |
| "Not just RBS on the High Street, but the trading positions in Asia, the mortgage books in sub-prime America, the property punts in Dubai. | "Not just RBS on the High Street, but the trading positions in Asia, the mortgage books in sub-prime America, the property punts in Dubai. |
| "I want to make sure that the next time a chancellor faces that decision they have a choice. To keep the bank branches going, the cash machines operating, while letting the investment arm fail." | "I want to make sure that the next time a chancellor faces that decision they have a choice. To keep the bank branches going, the cash machines operating, while letting the investment arm fail." |
| Shadow Treasury minister Chris Leslie said: "If the chancellor is now being dragged towards a partial climbdown, this is a step in the right direction. | Shadow Treasury minister Chris Leslie said: "If the chancellor is now being dragged towards a partial climbdown, this is a step in the right direction. |
| "We must see fundamental cultural change in our banks. If this does not happen then banks will need to be split up completely, as we made clear in the autumn." | "We must see fundamental cultural change in our banks. If this does not happen then banks will need to be split up completely, as we made clear in the autumn." |
| Anthony Browne, chief executive of the British Bankers' Association, acknowledged that banks had made "massive mistakes" and he accepted the need for reform. | Anthony Browne, chief executive of the British Bankers' Association, acknowledged that banks had made "massive mistakes" and he accepted the need for reform. |
| But he said the Government's change of heart on the reserve power to "electrify the ring fence" was good politics but bad economics that would lead to even less lending. | |
| "It's bad economics because it's yet another measure that makes it more difficult for banks to lend money to businesses, which is what the economy needs at this stage. | |
| "And the government said just before Christmas that re-opening the whole banking reform debate in this way would create massive uncertainty in the industry and that's why it was opposed to it. It's now changed its mind." | |
| He said that that created massive uncertainty and that would mean a weakening of the will to invest. | |
| He said it would damage London's attractiveness as a global financial centre. | He said it would damage London's attractiveness as a global financial centre. |
| Mr Osborne's speech comes at the start of a year of change for UK financial regulation. | |
| The Financial Services Authority is being replaced by two bodies. The Prudential Regulation Authority, part of the Bank of England, will regulate financial firms, and the Financial Conduct Authority (FCA) will oversee consumer protection. | The Financial Services Authority is being replaced by two bodies. The Prudential Regulation Authority, part of the Bank of England, will regulate financial firms, and the Financial Conduct Authority (FCA) will oversee consumer protection. |
| And later this year Mark Carney will become the new governor of the Bank of England, replacing Sir Mervyn King. | And later this year Mark Carney will become the new governor of the Bank of England, replacing Sir Mervyn King. |