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Are George Osborne’s plans to fix banking enough?

Picture of a pound coin

George Osborne has officially branded 2013 ‘the year of change in our banking system’ in his speech launching the Banking Reform Bill. But do the reforms really go far enough?

As finance campaigner for Which?, this morning’s speech gave me hope. It made me think that those who have been charged with making the important decisions on how to tackle the banking crisis might actually be listening to the consumer.

I’m under no illusions that there’s a big difference between rhetoric and actions. But it’s warming to hear the Chancellor talking of reforms to ensure that ‘banks work for their customers’ – one of the key asks of our Big Change campaign.

Changing banks for the better

The Banking Reform Bill has been introduced to Parliament this afternoon and, at its heart, seeks to change the very structure of banking groups. As a result, it should reduce the likelihood of banks ever needing huge government bailouts (funded by taxpayers’ money) to rescue them if they fail.

The Bill hopes to do this by introducing a ‘ring-fence’ to separate retail banking arms for their riskier investment arms. This prevents capital in the retail sector being used to fund activities in the investment arm. We should see a separate board of directors overseeing the investment arm, with only certain every-day banking activities being permitted within the ring-fence.

The Bill also outlines who’ll be responsible for maintaining the fence, and who’ll have the power to break banks apart entirely if they try to find ways around the ring-fence.

There are other proposals that should be welcomed too. For example, the introduction of a faster seven-day bank account switching service will help consumers switch to better banks and promote competition. But we would rather the government goes further and investigates the introduction of portable account numbers, which would make switching banks as easy as changing mobile phone provider.

What about bank sales culture?

However, the legislation is still missing a plan to tackle the sales driven culture that’s been responsible for the continuing banking crisis. We hope that the Chancellor’s call for professional standards in banking leads to meaningful action.

As it stands, it appears to be a good first draft. But I fear that if the government truly wants to turn public anger into trust again, the reforms need to be even better.


Interest rates. Deposit accounts should, by law, pay at least the current RPI or CPI rate, and then the government can guarantee loans to small companies with as much as it likes. As these rates vary, a reasonable average should be published by the Bank of England and the banks use it.

Agree with a lot that has been already said, especially the lack of prosecutions regarding the clear law breaking, endemic in the financial world. They get away with it, because they know that they can. As this appears to be the case, it puts the questioning spotlight on the Establishment,by that i mean the law makers, politicians,solicitors,Bankers,Land owners,carpet baggers etc, who it seems to me to have a vested interest in maintaining the status quo, regardless of who suffers, and it is usually joe puplic/retail investor who does the suffering. The system is in need of radical change, but it wont work on a unilateral basis, the interconnected financial world needs to be on board so its going to be an uphill struggle, but it needs to be done and soon. I firmly believe that there are a lot of genuine, honest, hard working politicians out there that need to show the courage of their convictions and show some leadership,regardless of party lines and bring about the changes that are needed in the long term interests of our people. Anyone remember the Glass/seagal act, maybe if Bill Clinton had not repealed it after caving in under massive self interested group pressure , then perhaps the crash would not have occured or may not have been as severe,in any case the commercial side of banking should be regulated not by the FSA, but by the Gambling regulators as its process is pure gambling.

tony browne says:
22 February 2013

We are living in a financial system called fiat currency. Or to the layman currency without any value. Apart of course for the one percent. This system has been used throughout history and has always failed. And when it fails they come to our rescue and set themselves up again. That is why you have these extremely rich families throughout history.Maybe one day we will wake up but i doubt it.

Lesley Dennis says:
22 February 2013

I am really disgusted with the banks bonuses for fraud,how can they justify these in relation to interest rates for savings for the ordinary person in the street. There should be justice for the customers who are being cheated as never before. Mr Osbourne needs to get a grip on any form of financial fraud, both the banks and companies who cheat by avoiding tax. Why should they allow banks to avoid legal intervention by lobbying. This is nothing more than immoral. Why are all the main parties so enslaved to big money and have forgotten they were voted to ensure that the general public are treated honestly and fairly.

Michael James says:
23 February 2013

I agree with Piers that the sales culture of the banks is one of the main reasons for the lack of trust in them. If they were to stop that culture and concentrate on providing a professional banking and financial service to customers, with their interests in mind, then the banking industry will re-invent itself and society as a whole will be more stable.

Laura Holland says:
25 February 2013

It’s simple really this whole mess started with the deregulation which allows retail banks to engage in investments and strategies which used to be the sole preserve of merchant banks. Until this divide is reestablished the reforms do not go far enough. If a merchant bank fails its clients suffer, if a retail bank fails a far greater number of ordinary people lose all their money, so the government has to step in and economy is destablised, if it can’t step in people starve – merchant bank clients never starve they all have other assets and investments. The argument about bonuses is a great media smokescreen for these simple facts- retail bank executives never used to make huge bonuses because growth was slow and steady, or non existent this is the natural pattern for retail banks- however once wild speculation on complex investments started profits rocketted and so did bonuses. The problem bonuses now appear to be permanently high whether profits are comeasurate or not even with banks now partly owned by the taxpayer, this ought to be stopped but succesive governments have bowed to lobbying to keep regulation so light it is almost non-existent.
Boom and bust will continue and bailouts will be needed until retail banks are prevented from acting like merchant banks.