/ Money

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.

Richard Robbins says:
5 February 2013

As Max Keiser keeps on saying – ad nauseam – the Banks need to be made to obey the law. The regulators are effectively toothless and it is difficult to prosecute wrong doers. The banks are not miss-selling, they are engaged in fraud. This cartel should be investigated for racketeering.
Selling complex derivatives, aka interest rate swaps, to small businesses will destroy the economy. The banks take advantage of people’s financial illiteracy to cream off profits. In doing so the banksters seem to be engaged in some sort of lunatic scorched earth policy that will completely eradicate any possibility of a recovery.
Ultimately crashing the world economy will wreck everything for everyone. Who really wants to be the King of a cess pit?
George Osbourne can pass as many laws as he likes but if the banking cartel participants are never prosecuted, they care not what laws are on the statute books.
Only lengthy prison sentences will stop this.
What most people fail to realise is that the big banks will end up swallowing up all of the small competition. Ultimately it doesn’t matter if you move your bank account to a smaller bank or Building Society. George Osbourne will allow the too big to fails to mop up everyone else in order to “save” the economy from the suicide bankers who claim that if they obey the law, the economy will crash – code for we will blow up the economy if you interfere in our fraud.
When the government is clearly in the employ of the banks, you will get nothing of substance done about the bankster plague.
When banks can commit serious crimes by manipulating global interest rates with gay abandon, clearly we are in trouble.
How about Which? investigate the manipulation of the precious metals markets by JP Morgan et al? It is one of the worst kept secrets to those who are financially literate. Re-hypothecation and central bank leasing (sell gold while simultaneously retaining it on their balance sheets) of gold has resulted in massively suppressed markets – and in doing so has made currencies appear stronger than they really are.
The entire financial system is based on fraud and deception.

richard says:
6 February 2013

I wouldn’t trust George Osborne to manage ANYTHING well – especially anything to do with Banks (the Tories friends)

Sheila says:
8 February 2013

Wouldn’t trust government (still rewarding failure and protecting themselves) and will never trust a bank again.
“Ordinary” bank employees get normal pay and do a reasonable job but the so called high flyers/traders etc are more like vampire bats!

Particularly infuriated by statements like “must pay ( ridiculously high) salaries and (mega) bonuses to keep the best people”

WHAT best people? Most of these top bankers are cowboys with a flagrant disregard for customers. Others are just gamblers who should be made to use their own money to play with.

WHERE would these mythically irreplaceable folk disappear to if ALL UK banks started paying ONLY fair salaries and no bonuses?
If the answer is abroad, then let them go and try to compete in an open market for highly paid jobs fiddling funds elsewhere!
Lots of top salary bank staff are living in fear of imminent redundancy and some desperately seeking jobs so why the need to bribe those currently in employment to stay?

Sunny Jim says:
8 February 2013

George Osborne is an utterly disaster. H utterly failed to see the banking crisis coming and clearly hasn’t a clue about what needs to be done to resolve it, let alone how to fix the economy.

He has watered down the Vickers proposals and given in time and again to covert lobbying pressure by the banks to minimise the scale of the changes and maximise the time they are given to implement them.

He needs to completely separate high street from investment banking, end the scandal of the derivatives market and impose a windfall tax on banks and bankers to ensure that they – and not the unemployed, the destitute and the homeless – are made to pay for the mess which they have created.

George Osborne is only intent on dismantling the welfare state and sabotaging any meaningful action to tackle climate change by promoting renewable energy. He is an utter disaster and should be sacked at once.

kenneth says:
8 February 2013

90+% of politicians have abdicated their responsibilities for safeguarding society. They are owned by the banks and international conglomerates and oil companies in particular used to levy more and more tax indirectly. Short termism is everything, society can do nothing to correct this situation, we have democracy only for the time it takes to put a cross on a ballot paper at an election. Some democracy!


Unless until executives of banks and other institutions are personally heavily fined when something goes wrong instead of just the institution being fined (which means that in the end result we [the customers] pay the fines) bankers and other high ranking executives will continue to take unnecessary risks and bend the rules because they personally will not be hurt if and when they are found out. Hit their pockets hard for misdemeanours and they will then act more responsibly.


Is it too much to ask for there to be a bank, or banks, that are established purely for administering personal accounts, not tied to the tails of major commercial interests or are involved in deception and price fixing and do not pay their senior staff obscene salaries and bonuses?

Maybe one exists, if so, I’d like to know!


No, it”s not too much to ask. They are called Building Societies.

Wojciech Dmochowski says:
11 February 2013

I completely agree with Richard Robbins. Why isn’t Bob Diamond facing the prospect of a trial over Libor? The banksters are responsible for PPI, sanctions busting, laundering the profits of drug cartels, “risky investments”, etc. There is no code of ethics governing their conduct. The Tory Party receive 50% of their funding from The City so their inaction is hardly a surprise – Rich White Trash all in it together…

Mark St Giles says:
12 February 2013

Both the Vickers Report and the Government have shirked the obvious solution. Ring fencing will never work since the banks will quickly find gaps in the fence. The only and obvious solution which served America well is complete separation a la Glass Steagall. This did not in any way damage America’s economy which flourished up to the repeal of the act in 1999. As one senator said ten years after the repeal ““To fuse together the investment banking function with the F.D.I.C. banking function has proven to be a profound mistake.” Banks have mounted a successful PR campaign to show that separation would damage their ability to lend to small business, the standing of the City and so on. This frightened the politicians, most of whom are financially illiterate, enough to rule it out. But no one has ever explained why separation would be so damaging. If for example banks split their utility banking from their casino banking into two parts and gave a share in each to existing shareholders, it would be interesting to see which part would be valued more highly by the market. If only deposits with the utility bank were insured, that would also ensure that the casino part would have to pay much higher rates to finance their fun and games. It is interesting to note that Osborne has revived this debate.Perhaps he has seen the light.

Adrian Montagu says:
21 February 2013

Total separation of investment banking please. Computer controlled buying and selling MUST be restricted to a maximum of 1 transaction a second or we will have a computer generated crash (financial). Lets have amortisations instead of the current mortgage system where we have fixed interest rate for the term and a fixed repayment element and therefore a reducing interest payment. They do this in other countries. No derivitives please as it is the tail wagging the dog – it affects the business in which those derivitives speculate.


Edgecumbe VANBECK says:
21 February 2013

“a politician is an a**e upon
which everyone has sat except a man”

e. e. cummings


The main problem is that the banks are indeed ‘too big to fail’. They should be broken up. Not just into ring-fenced retail and gamblers but into smaller, more customer-friendly banks such as we used to have – National Provincial, Westminster, Midland, Lloyds, Trustee Savings etc. Then we would have real choice, less likelihood of major scandals and more ability to punish the wrong doers.


The problem is that the banks ARE ‘too big to fail’. They should be broken up.

Not just ring-fenced into retail and gamblers but into the smaller, more customer-friendly banks that we used to have – National Provincial, Westminster, Midland, Lloyds, Trustee Savings etc. Then we would have real choice, less likelihood of major scandals and more ability to punish the wrong doers.