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Ed Miliband urges bank branch sell-off to tackle 'broken' market Ed Miliband urges bank branch sell-off to tackle 'broken' market
(35 minutes later)
The UK's five largest banks are too powerful and should be forced to give up "significant" numbers of branches, Labour leader Ed Miliband has said.The UK's five largest banks are too powerful and should be forced to give up "significant" numbers of branches, Labour leader Ed Miliband has said.
He argued financial services have been "an incredibly poor servant of the real economy" for decades and should be "serving" the needs of small business.He argued financial services have been "an incredibly poor servant of the real economy" for decades and should be "serving" the needs of small business.
A Labour government would "turn the tide" by creating two "challenger" banks to boost High Street competition.A Labour government would "turn the tide" by creating two "challenger" banks to boost High Street competition.
But the Conservatives said Labour's policies were "all over the place".But the Conservatives said Labour's policies were "all over the place".
The "big five" banks - HSBC, Barclays, RBS, Santander and Lloyds Banking Group - account for the majority of bank customers and lending.The "big five" banks - HSBC, Barclays, RBS, Santander and Lloyds Banking Group - account for the majority of bank customers and lending.
In his speech at the University of London, Mr Miliband likened the "broken" banking system to the energy market, claiming "too much power is concentrated in too few hands" and this has had a detrimental effect on enterprise and jobs.In his speech at the University of London, Mr Miliband likened the "broken" banking system to the energy market, claiming "too much power is concentrated in too few hands" and this has had a detrimental effect on enterprise and jobs.
A Labour government, he said, would instruct the Competition and Markets Authority to report within six months of the May 2015 general election what the limit on a bank's market share should be and the timetable for any sell-off of branches, which should be completed by 2020.A Labour government, he said, would instruct the Competition and Markets Authority to report within six months of the May 2015 general election what the limit on a bank's market share should be and the timetable for any sell-off of branches, which should be completed by 2020.
'Reckoning''Reckoning'
He said: "Of course, financial services are an important industry in itself. But for an industry that is supposed to be a 'service', it has been an incredibly poor servant of the real economy, not just since 2010 - or 2008 - but for decades in this country.He said: "Of course, financial services are an important industry in itself. But for an industry that is supposed to be a 'service', it has been an incredibly poor servant of the real economy, not just since 2010 - or 2008 - but for decades in this country.
"We need a reckoning with our banks, not for retribution, but for reform to tackle the cost of living crisis in our country."We need a reckoning with our banks, not for retribution, but for reform to tackle the cost of living crisis in our country.
Mr Miliband added: "If we carry on as we are, we will end up stuck with the same old banks dominating our high street: the old economy.Mr Miliband added: "If we carry on as we are, we will end up stuck with the same old banks dominating our high street: the old economy.
"In America, by law, they have a test so that no bank can get become so big and powerful that it dominates the market."In America, by law, they have a test so that no bank can get become so big and powerful that it dominates the market.
"I want to talk about the same principle here...and establish for the first time a threshold for the market share any one bank can have of personal accounts and small-business lending.""I want to talk about the same principle here...and establish for the first time a threshold for the market share any one bank can have of personal accounts and small-business lending."
Labour would also introduce a new National Credit Register for small and medium-sized businesses, to increase competition and improve lending to small business by allowing all banks access to comprehensive data on their credit histories.Labour would also introduce a new National Credit Register for small and medium-sized businesses, to increase competition and improve lending to small business by allowing all banks access to comprehensive data on their credit histories.
Bank of England Governor Mark Carney said earlier this week that he supported the view that a cap on banks' market share "would not result in substantial improvement to competition".Bank of England Governor Mark Carney said earlier this week that he supported the view that a cap on banks' market share "would not result in substantial improvement to competition".
'Labour's recession''Labour's recession'
He told the Commons Treasury Committee: "Just breaking up an institution doesn't necessarily create or enable a more intensive competitive structure."He told the Commons Treasury Committee: "Just breaking up an institution doesn't necessarily create or enable a more intensive competitive structure."
But Mr Miliband insisted: "I am not talking about whether we should have new banks but about how we make it happen...But Mr Miliband insisted: "I am not talking about whether we should have new banks but about how we make it happen...
"It is not about creating new banks that control some tiny proportion of the market, but new banks that have a substantial proportion and can properly challenge existing banks."It is not about creating new banks that control some tiny proportion of the market, but new banks that have a substantial proportion and can properly challenge existing banks.
"And we are not asking whether existing banks might have to divest themselves of a significant number of branches. We are asking how we make it happen.""And we are not asking whether existing banks might have to divest themselves of a significant number of branches. We are asking how we make it happen."
Shadow business secretary Chuka Umunna acknowledged that Labour's plans could cause share prices of banks - including RBS and Lloyds, which are part government owned - to fall. Mr Miliband acknowledged the last Labour government had made mistakes in bank regulation but said David Cameron was happy with a "steady as you go" approach to bank reform while more radical steps were needed.
"I'm not denying in the short term that you may see a hit on the share price of these banks, it's probably happening as we speak now," he said on BBC Radio 4's Today. Asked what he thought the maximum size of a bank should be, he said he would "not dream up a figure out of the air" and the regulators should decide - but he made it clear that new entrants should be "sizeable".
"But the reason we're doing this is so that we can grow our small businesses, which not only create in and of themselves more middle income jobs, so we actually get people earning more, but also they're very important feeders in the supply chain for our larger businesses." Speaking earlier shadow business secretary Chuka Umunna acknowledged the plans may cause share prices of banks - including state-backed RBS and Lloyds - to fall - but they would be beneficial for the economy in the long run.
Asked about Mr Carney's remarks, he said the bank governor should not be dragged into political matters and suggested he had only expressed his view after being asked a "leading question" by a Conservative MP.Asked about Mr Carney's remarks, he said the bank governor should not be dragged into political matters and suggested he had only expressed his view after being asked a "leading question" by a Conservative MP.
'Labour mess''Labour mess'
For the Conservatives, Treasury minister Sajid Javid said Labour had caused many of problems with the banking system and Ed Miliband was "complaining that his own mess isn't being cleaned up fast enough".For the Conservatives, Treasury minister Sajid Javid said Labour had caused many of problems with the banking system and Ed Miliband was "complaining that his own mess isn't being cleaned up fast enough".
The CBI said there were already too many proposals for "structural change".
"Let's have more competition on the high street but a fixed number of bank branches per bank would lead to less consumer choice and service," its director general John Cridland told the BBC.
Lib Dem Business Secretary Vince Cable said he agreed more competition was needed but many of the things Labour wanted "have actually happened"Lib Dem Business Secretary Vince Cable said he agreed more competition was needed but many of the things Labour wanted "have actually happened"
The British Bankers Association said competition was as much about the range of products on offer as the number of banks on the High Street.The British Bankers Association said competition was as much about the range of products on offer as the number of banks on the High Street.
But it said reducing the capital requirements for new banks would make it easier for them to get off the ground. "Forcing people to change bank by selling their local branch is not what customers want," said its chief executive Anthony Browne.
"People want to choose who they bank with - these proposals would see customers forced by politicians use a different bank against their will."
Efforts by the Lloyds Banking Group to dispose of more than 630 branches last year foundered after Co-op pulled out of a deal due to financial problems.Efforts by the Lloyds Banking Group to dispose of more than 630 branches last year foundered after Co-op pulled out of a deal due to financial problems.
But the firm has re-launched the TSB retail bank, with about 600 branches, while RBS has set out plans to revive Williams and Glyn's - which ceased trading in 1985 -to take over RBS branches in England and Wales and NatWest outlets in Scotland.But the firm has re-launched the TSB retail bank, with about 600 branches, while RBS has set out plans to revive Williams and Glyn's - which ceased trading in 1985 -to take over RBS branches in England and Wales and NatWest outlets in Scotland.