August 31, 2011

Coalition split over banking reform

by Jan Harris

The Independent Commission on Banking (ICB) is due to publish proposals for banks to separate retail operations from higher-risk investment operations, on 12 September.

The proposed banking model would protect consumers in the event of a future banking crisis, as it would allow the authorities to take control of retail banking operations.

However, while Business Secretary Vince Cable is demanding that the proposals should be introduced immediately, prime minister, David Cameron, and Chancellor, George Osborne, are supporting a longer-term approach, potential delaying the implementation of the plans until after the next general election.

The British Bankers’ Association has warned that the changes should be delayed in case they damage the already weak economy.

The Confederation of British Industry has also warned that the reforms could put the economy under further pressure.

John Cridland, the CBI’s director general commented to Dow Jones Newswires that the government would be “barking mad” to implement some of the ICB’s proposed changes.

In an interview with The Times, Mr Cable criticised banks for using the European financial crisis as an excuse to delay the reforms.

With Nick Clegg supporting Mr Cable, the issue looks set to spark a power struggle at Westminster.

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