Today marks the next step in the Coalition Government’s ambitious plans to reform the UK banking sector.
Today marks the next step in the Coalition Government’s ambitious plans to reform the UK banking sector. The Banking Reform Bill, introduced in the House of Commons today, will deliver the most radical reform to banking in this country in a generation.
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. Taxpayers will no longer be on the hook for banks that get into trouble.
- 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 focussed 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 flout the rules the Government will ensure that the Bank of England has a reserve power to completely separate an individual bank if necessary.
Notes for Editors
The Government has built a consensus on the necessity to implement its reforms to the banking sector, based on the recommendations of the Independent Commission on Banking (ICB). The introduction of the Banking Reform Bill in Parliament is the first legislative step in the process of implementing these reforms.
Today’s Financial Services (Banking Reform) Bill follows a period of pre-legislative scrutiny by the Parliamentary Commission on Banking Standards, and two detailed consultations.
The Government has published a response to the recommendations of the Parliamentary Commission on Banking Standards:
In December 2012, the Parliamentary Commission on Banking Standards published its recommendations to the Government from its pre-legislative scrutiny of the Banking Reform Bill in its “First Report”.
In June 2012, the Government published its consultation, “Banking reform: delivering stability and supporting a sustainable economy”.
In December 2011, the Government responded to the recommendations of the Independent Commission on Banking:
The ICB’s recommendations for structural and non-structural reforms to the banking sector were made available in September 2011:
The Bill and accompanying documents can be found on the UK Parliament site.