Bank reforms must press ahead, says Which?
- 3 June 2012
- From the section Business
Chancellor George Osborne should resist pressure from banks to reverse planned reforms of the financial sector, consumer group Which? has said.
Mr Osborne is creating a new watchdog that Which? says should protect consumers from "rip-off" charges.
The Financial Services Bill will mean the replacement of the Financial Services Authority by two new bodies.
The British Bankers' Association denied lobbying Mr Osborne and said banks appreciated the need for the bill.
The Financial Services Bill is due before the House of Lords and a banking reform White Paper is due out.
Banks have claimed that the reforms may prompt big financial institutions to leave the UK.
Which? says the government must ensure consumers are sufficiently protected from a recurrence of the banking collapse that led to a costly public bailout.
Executive director Richard Lloyd said: "We have seen intense lobbying from the banks... including a crescendo of scaremongering over recent weeks on the risk of the end of 'free banking' and of big financial institutions leaving the country.
"The chancellor must resist buckling under this pressure."
He said without "strong action" to shake up the banking culture, consumers would continue to pay the price.
The group urged the government to keep "ordinary people" in mind when pushing through its reforms.
The Financial Services Bill will replace the structure - introduced by the previous Labour government - under which oversight is shared between the Bank of England, the Financial Services Authority (FSA) and the Treasury.
Instead, a new Financial Conduct Authority will be established to enforce the effective and fair functioning of markets.
The Financial Policy Committee will be established to look after the general well-being of the UK financial system.
And a new Prudential Regulation Authority will monitor the performance of banks and other companies that manage significant risks on their balance sheets.
The bill will also give the chancellor powers to veto decisions made by the Bank of England when dealing with bank bailouts.
Financial institutions have campaigned against plans to put savers first if a bank becomes insolvent.
The government is also due to publish a White Paper on banking reform, introducing measures to prevent another banking collapse.
Angela Knight, the British Bankers' Association's chief, told the BBC that the banking sector was working with the government to make reforms, not block them.
"We entirely agree that there needs to be changes and we're working very strongly with government on these changes.
"Do customers need protection? Do they need to be put first? That is absolutely right as well.
"There are debates that need to be taken but actually they've got to be taken properly."
Mr Osborne is due to deliver his Mansion House speech on the economy on 14 June.