Banking Commission: Reforms 'Not Enough'

The Government's plans to fix the UK's banking system do not go far enough, the Parliamentary Commission on Banking Standards has said.

The panel - set up following the Libor-fixing scandal - said regulators should have the power to force banks to completely split their retail and investment banking operations.

The commission's second report comes on the day that the Government's Banking Reform Bill is debated in Parliament.

It said a number of recommendations from its first report are not currently in the planned legislation - but should be.

The group of MPs and peers called for extra powers to break up banks if they do abide by rules to separate their investment and high street operations.

Chancellor George Osborne had promised to introduce powers to "electrify the ring fence" if lenders failed to split their divisions.

George Osborne said this year the banking system would be "re-set"

But the report said this does not go far enough, and pushed for the introduction of a "second reserve power for full, industry-wide separation" if the ring fence is broken.

It also described plans for a regulator-led review of ring fences as "wholly inadequate".

"Such a review conducted by the regulator would be little different in character from the regulator's annual report and could amount to no more than a case of the regulator marking its own examination paper," the report said.

Instead, the commission said an independent review of whether ring fences were doing their job was crucial.

Its chairman, Andrew Tyrie MP, described the bill as "improved", but said "much more work" was needed.

"The Government rejected a number of important recommendations," he said.

"The commission has examined these again, alongside the Government's explanations for rejecting them.

"We have concluded that the Government's arguments are insubstantial."

The report concluded: "There is still a long way to go if the legislation now before the House of Commons is to provide legislative impetus for a transformation of the UK banking system.

"The bill as presented to the House of Commons represents not the beginning of the end for the necessary reform process, but the end of the beginning."

Labour described the report as "disappointing reading".

Shadow chancellor Ed Balls added: "It confirms George Osborne is continuing to duck the radical banking reform we need and which the cross-party commission has demanded."

The panel, whose members include Archbishop of Canterbury Justin Welby and former chancellor Lord Lawson, will publish wider recommendations for banking reform in May.

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