04 February 2013

HM Treasury: Speech by the UK Chancellor of the Exchequer, Rt Hon George Osborne MP, on the Reform of Banking

Whether its insurance and accountancy, shipping and legal services, hedge funds, private equity, asset management or investment banking, when the world wants to transact – it wants to transact through London. And part of having a successful financial services industry is having successful British banks, who want to lend at home and compete around the world.

Through the work we’ve done, the expert help we’ve enlisted, we can make 2013 the year of change in our banking system. 2013 is the year when we re-set our banking system. So the banks work for their customers – and not the other way round. So that those who guard over the banks to keep our economy safe are the right people with the right weapons to do the job. And so that when mistakes are made, it’s the banks and not the taxpayer that picks up the bill.

Let me tell you about the four concrete things that are going to change this year:

• First, we’ve got a brand new watchdog with new powers to keep our banks safe so they don’t bring down the economy.
• Second, we’ve got a new law to separate the branch on the high street from the dealing floor in the city to protect taxpayers when mistakes are made.
• Third, we’re going to start, with the industry, changing the whole culture and ethics of the business, so they work for you.
• Fourth, we’re going to give customers the most powerful weapon of all: choice.

I can announce today that the Government will bring forward detailed proposals to open up the payment systems. We will make sure that new players in the market can access these systems in a fair and transparent way.

The last Government let the established players off the hook by failing to implement the conclusions of the review they themselves commissioned, and allowing the big existing banks to regulate themselves. This Government will make sure payment systems serve the needs of consumers, not the needs of the established banks.

Full speech

CBI response

Katja Hall, CBI Chief Policy Director, said: “It’s right to focus on improving competition in banking because it’s a more powerful driver of culture change than structural reform. A healthy banking sector needs both challenger and established banks to thrive, so the ideas to boost competition, outlined by the Chancellor, will need to be scrutinised in detail to ensure they deliver this. Small businesses in particular should benefit from the ability to switch current accounts quickly and easily.”

On bank structures and an electrified ring-fence, Katja Hall said: “Businesses want to be able to access the full range of banking services under one roof, so banks should press ahead with implementing the ring-fence proposals to avoid the threat of full separation. It’s important that individual banks are in control of their own destiny on the question of structure.”

Press release © CBI

© HM Treasury