Today the government entered the final legislative phase of its plan to create a stronger and safer banking system that supports the economy, consumers and small businesses by publishing key amendments to the Banking Reform Bill.
The government’s reforms are based on almost three years of consultation on the future of the UK’s financial sector and once complete will represent the biggest ever overhaul of Britain’s banking system.
The Chancellor of the Exchequer has set out the government’s four key areas of banking reform:
- supervision: the government has put the Bank of England back at the centre of the supervisory regime, with new powers to identify and address systemic risks as they emerge, ensuring safe banks that will not bring down the economy in the future
- structure: the government has brought forward new laws to separate the branch on the high street from the trading floor in the City to protect taxpayers when mistakes are made. In doing this the government is implementing the recommendations of the Independent Commission on Banking (ICB) which it set up in 2010
- culture: the government has announced that it will implement major reforms so that banks work for the economy and consumers.
- competition: the government is aiming to empower consumers by giving them greater choice which should incentivise innovation and competition within the banking sector
Following revelations of attempted LIBOR manipulation last year the government also asked the Parliamentary Commission on Banking Standards to urgently review the culture of the UK banking sector and make recommendations. The government has brought forward amendments to the Banking Reform Bill based on those recommendations that require primary legislation.
The amendments, published ahead of the Banking Reform Bill entering the House of Lords next week, will:
- enhance competition in the banking sector to deliver better outcomes for consumers by ensuring that the UK’s financial regulators are sufficiently focused on improving competition and have the powers they need to tackle anti-competitive behaviours
- impose higher standards of conduct on the banking industry by introducing a criminal sanction for reckless misconduct that leads to the failure of a bank, and a more stringent approval regime for senior bankers
- ensure that taxpayers are no longer on the hook for future bank failures through a number of tools including an “electrified” ringfence and a “bail-in” mechanism
The government will also be bringing forward amendments, during the House of Lords committee stage, to establish a new utility-style regulatory regime for payments systems in order to tackle one of the most serious barriers to entry for new market players
A total of 86 amendments have been published today. The Banking Reform Bill is due to receive Royal Assent by early 2014.
Treasury spokesperson said:
We are determined that the government’s reforms to the banking sector deliver a stronger and safer financial system that supports the British economy, businesses and consumers.
Today’s amendments mark the final part of the government’s plan for the biggest ever overhaul of the UK banking system. Already we have put the Bank of England back at the centre of prudential supervision and now, through the Banking Reform Bill, we are delivering on our promise to increase competition, drive up standards and increase financial stability.