HM Treasury: UK Government publishes Banking Reform Bill

04 February 2013

The Government's banking reforms will fundamentally change the structure of the UK banking sector, to make banks more resilient to shocks and more resolvable in the event of a failure, and reduce the severity of future financial crises.

Today marks the next step in the Coalition Government's ambitious plans to reform the UK banking sector. The Banking Reform Bill will deliver the most radical reform to banking in the UK in a generation. Taxpayers will no longer be on the hook for banks that get into trouble.

The Bill:

• will require UK banks to separate important, everyday banking activities from more volatile investment bank activities, by introducing a ring-fence around the deposits of individuals and businesses;
• gives depositors, protected under the Financial Services Compensation Scheme, preference if a bank enters insolvency;
• will give the Government power to ensure that banks are more able to absorb more losses during a crisis;
• will ensure that the new prudential regulator is focused on holding banks to account for the strength of their ring-fence. The Government will be bringing forward amendments to the Bill to give the regulator the power to enforce the full separation of individual banks if they flaunt the new rules;
• ensure that the industry, not the taxpayer, meets the Treasury’s costs of working within the new parts of the international regulatory architecture, such as the Financial Stability Board.

Financial Secretary to the Treasury, Greg Clark said: “The Banking Reform Bill, introduced to Parliament today, will bring about the biggest shake-up of the structure of banking for decades, making the banking sector safer and better able to serve the needs of individuals and businesses. 

“The Bill will mean that taxpayers are never again on the hook when banks fail. The Government will implement the Independent Commission for Banking’s recommendation to ring-fence day-to-day banking from investment activities. To ensure that banks do not flaunt the rules, the Government will ensure that the Bank of England has a reserve power to completely separate an individual bank if necessary.”

Full notice

Financial Services (Banking Reform) Bill 2012-13

See also Speech by the Chancellor of the Exchequer, Rt Hon George Osborne MP, on the Reform of Banking

© HM Treasury