Government defends 'serious, radical' banking reforms

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Financial Secretary to the Treasury Greg Clark has defended the government's proposals for reform of the banking industry, saying the measures are "serious, radical and meticulous".

He was replying to an urgent question from shadow Treasury minister Chris Leslie on 4 February 2013.

Britain's biggest banks will face complete separation if they do not follow new rules ring-fencing risky operations from savers' deposits, under the new Banking Reform Bill.

The legislation allows the government and a new banking watchdog powers to "electrify the ring-fence" if banks fail to split high street branch operations from the dealing floor.

But Mr Leslie criticised the government's decision not to introduce "full reserve powers", permitting total separation of all banks.

Mr Leslie called it "half-hearted" and asked: "Why does it feel as though the chancellor has to be dragged kicking and screaming towards reform?"

A similar point was made by Labour members of the Treasury Committee, including Pat McFadden and Andy Love.

The Financial Secretary countered that Labour had taken no action to regulate the banks during their time in office and argued "the system they introduced helped bring about the crisis we face".

He pointed out that the governor of the Bank of England "did not want the power to break up the banks".

Conservative Chair of the Treasury Committee Andrew Tyrie wanted to know why the government had not taken forward his committee's suggestion there should be an external assessment before the reserve powers are used.

Lib Dem MP Stephen Williams advocated "a hot blast of competition" for major banks from community banking schemes.

Mr Clark said he "completely agreed" there was a need for strong community banks and assured Mr Tyrie there would be a chance to bring in amendments on external assessment as the bill progresses through the House.

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