Why Labour's bank break-up has not hurt shares

City workers walking past buildings in shadow

Investors seem to have taken in their stride Ed Miliband's pledge to break up the big banks and impose a ceiling on their respective shares of the market.

The price of Barclays and Lloyds shares dropped less than 1% and those of Royal Bank of Scotland by a bit more than 2%.

Which is not desperately significant on a day when the stock market as a whole was largely flat.

So why the lack of shock and awe?


Well investors apparently doubt Labour's resolve to do what is necessary to force the disposal of hundreds of branches - and also think the reforms would take many years.

For example, the soon-to-launch Competition and Markets Authority could not, as currently constituted, simply be instructed to devise a way of creating two new challenger banks from the existing banks in just six months.

Nor could it be told to set a new legal maximum for the size of banks in the same time frame.

So Ed Miliband would have to introduce new competition legislation on taking office - which Labour tells me it would do, but investors believe could not be passed quickly or easily.

And bankers also believe that even if the CMA imposed a new cap on the size of banks, that could be challenged under EU law.

Or to put it another way, investors seem to believe that Mr Miliband is posturing to win votes, and would conveniently find a way to abandon the break-up plan after the election.

Which, according to Mr Miliband's close colleagues, shows that the City remains a bit short-termist and perhaps naive.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 10.

    Mr. Preston - Your job is to report - not comment why the share price has not moved. Did you want to bring the share price down of the banks? Well you need to try a little more harder.

  • rate this

    Comment number 7.

    Of course it is windbag posturing from someone who-
    a) hasn't a clue or:
    b) does now how hard it will be, but is just cynically blagging for votes.

    Only when the banker parasites actually start packing their bags and heading out of the UK will any recovery have a chance.
    P.S. before you go, pay us our money back.

  • rate this

    Comment number 15.

    The city RP,
    shorttermist definitely Yes
    naive sadly No

    Labour will win more votes by threatening to diminish the size of the big banks..
    George and Dave were supposed to sort out the banks, but nothing has happened, once in power they are just throw the electorate to the sharks in exchange for promises of exorbitant lecture fees paid when the electorate don't behave and vote them out.

  • rate this

    Comment number 83.

    Tim Browning @80
    "zero substance"
    Reflecting what, exactly?

    2,500 years on towards democracy, from 'demes' of the people now to just 'the people' as equal (the better all to survive, my dear) & 'as one' 'sovereign' (if playing fair: no pink dragons, nor purple), HOW is it that we see EVERYWHERE corruption, main parties both One Nation but neither able to lead for equal partnership?

    Worth asking?

  • rate this

    Comment number 89.


    Exactly. No hiding place for lender of last resort, state amongst states. Inherited delegation of responsibility to 'private sector' is now at best dangerous, at worst fraud.

    In large & complex societies, the number & variety of enterprises probably requires a matching complexity of investment agencies, the key not 'public or private' but equal partnership for people


Comments 5 of 138



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