Banks need root-and-branch reform, says Labour's Ed Balls


Ed Balls: "The government is dragging its feet"

Labour has demanded that top High Street banks should be forced to sell off hundreds of branches in a "root-and-branch" reform of the industry.

Shadow chancellor Ed Balls told the BBC that the government was "foot-dragging" on the issue.

Labour is proposing that the sold-off branches should be used to create "challenger" banks, to increase lending and competition within the sector.

But the government said it was already working to reform finance.

The coalition says it is committed to creating challenger banks, to compete with the "big five" of Barclays, Lloyds, HSBC, RBS and Santander.

Labour believes there should be a minimum of two challengers in place by 2015, meaning more than 1,000 branches would need to be sold off by the existing large banks to create seven sizeable lenders in the UK.


The government replied that it was already facilitating the creation of two challenger banks, in the shape of Co-operative Bank and Virgin Money, with a source telling the BBC: "Labour is simply demanding what we've already done."

The Mail on Sunday suggests that, in a speech on Monday, Labour leader Ed Miliband will say the "big five" of Barclays, HSBC, Lloyds, RBS and HBOS should divest of hundreds branches to enable the privately run challenger banks to emerge.

Mr Balls said: "The government and [Business Secretary] Vince Cable are foot-dragging on the floor."

Vince Cable: "...sorting out the banking crisis - that's top of my priorities"

But Mr Cable told the Andrew Marr Show the government was already acting to reform banking, adding: "I want to see more competition. It's a good idea and it's happening... we are creating a more competitive banking system."

He accused some of the existing banks of not providing enough lending to businesses but concentrating on "short-term trade profits and not focusing on the long-term".

"It's throttling British industry," he added.

An investigation by US and UK regulators into the rigging of inter-bank lending rates has resulted in a record fine for Barclays, with the Serious Fraud Office confirming it has formally launched an investigation.


Mr Balls said this should result in criminal proceedings, telling BBC One's Andrew Marr Show: "The reason why people are so angry is they think when people avoid their taxes or cheat on benefits they get sentences in jail.

"But when bankers do massive multi-million or billion pound frauds, there aren't criminal prosecutions.

"And the government should have acted - and I think the Fraud Office has been very, very tardy on this."

But a government source said "Labour left us a system where there were no criminal sanctions through the regulatory system. We are changing that."

Mr Cable also said the Royal Bank of Scotland, which is mostly owned by UK taxpayers, must co-operate with Canadian authorities investigating the interest-rate fixing scandal.

RBS has been accused of failing to hand over documents which could contain evidence of wrong-doing, but it insists it is co-operating.

The Barclays scandal has led to a political row between Labour and the coalition about how a subsequent inquiry should be handled.

Labour voted against the creation of a parliamentary committee to investigate the scandal after its bid to launch a judge-led inquiry was rejected by 320 votes to 239, a government majority of 81.

The Commons backed a parliamentary inquiry, carried out by a specially created committee of MPs and peers, by 330 votes to 226, a majority of 104.


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  • rate this

    Comment number 1233.

    Success or failure of banks affect the whole economic status of a country, and hence should not be treated with less importance than internal affairs or military of any state. Are we comfortable to handover military affairs to private companies? If not, why banks? The only solution is state owned, not-for-profit banking SERVICE.

  • rate this

    Comment number 1232.

    It is time to change how shareholders can control companies you have to go for one vote one shareholder so you stop one big shareholders from caring the boards decisions against the other shareholders
    The number of shares should only count to how much dividend each shareholder get not how many votes a shareholder as

  • rate this

    Comment number 1231.

    The branch networks are the most valuable tangible asset which a retail bank possesses. Forced sale in order to set up competitor retail operations will protect UK assets and transfer retail business away from the tainted to clean operations. This could lead to an analog of the German KfW setup in the UK. This would reduce the risk to the broader economy that the casino cash cows currently pose.

  • rate this

    Comment number 1230.

    When is the FSA / US authorities going to announce their investigation into the 'other' UK banks?

    Is this being 'managed' so that it comes out during the media 'silly season' when Parliament is on its summer hols?

    We have only heard about Barclays and that was bad enough, we need to know about the others and now!

    How can Parliament start an inquiry while this is still outstanding?

  • rate this

    Comment number 1229.

    Earlier this evening watched a programme about medieval torture practices. For me there is a connection here and bankers.

  • rate this

    Comment number 1228.

    the branches are irrelevant, the banks have nothing to do with business (trade & transaction finance)

    so here we have another poli - at our expense - putting up fantasy

    and he has a constituency - clearing and 'investment' bank employees - without a real job; so what does he do? - he dangles the carrot of 'life on benefits' - as long as they do (with our money) his bidding

  • rate this

    Comment number 1227.

    Its about time a front bench MP came out and said this. Where was Ed Balls when the Occupy movement was saying this? Shame we cant trust the Labour party any more. They are as much stooges of the establishment as the tories are. The Labour party lost credibility with the advent of Blair. I'd only ever believe in them again if they reinstated clause 4 of the party constitution.

  • rate this

    Comment number 1226.

    Scroungers prevent recovery.
    Time we weaned ourselves off scroungers.
    Rosy Regards,

  • rate this

    Comment number 1225.

    Does anyone remember Thatcher's 'Free Enterprise'?

    Those wonderful days when SID was only a phone call away so you could buy shares of all our major utilities (BT etc.)

    Well it took time and several major global financial disasters to bring eveyone back to earth.

    Now we in the UK are starting to be aware of the malpractice and mis-management that has gone on for the last 20+ years

  • rate this

    Comment number 1224.

    Great idea Mr Balls. Maybe call the new bank "Labour". See how many trust them with their money. HOW ABOUT ZERO.

  • rate this

    Comment number 1223.

    1221. Mr Right / 180 PJB
    The court of public opinion is a bit Kangaroo - the knot for noose is not being tied by the public though. A human tragedy here is that a high percentage of the nations talent been smeared, coerced into criminal enterprise, and broadly squandered on activities not productive to society. No wonder the UK is looking a bit shabby these days.

  • rate this

    Comment number 1222.

    If you split up the banks you have to have thorough regulation of all parts of the system wether it is high street or investment you would all so have to include hedge funds as well and limited there holdings in the banks so all investors have the same power to bring the boards under control this would mean that each shareholder would have 1 vote no matter how many shares they hold

  • rate this

    Comment number 1221.

    "... I just don't identify the "banker" descriptions ...."
    Nice effort PJB, but don't waste your breath.
    The Kangaroo court has already handed down its guilty verdict.
    No more representations can be accepted on behalf of the defence, however factually correct.
    The process now has us metaphorically gathered under a nearby tree with a rope slung over a low branch.

  • rate this

    Comment number 1220.

    Golden (reserves) Brown ably assisted by Ed Balls have the experience to sort out these bankers.
    Pity they haven't got the financial brains to tackle them.
    It still makes my stomach churn to remember Brown opening Lehman Brothers UKHQ.
    There again, I might be bigoted!

  • Comment number 1219.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 1218.

    The sheer brass neck of Ed Balls is quite something to behold.

    How he has the shameless audacity, temerity and gall to appear on a public platform is beyond me.

  • rate this

    Comment number 1217.

    When I read this, the whole Vince Cable, Ed Balls stance became much clearer.

    The banks need regulating. The Tories will NEVER regulate anything. End result - we need 3 years to come yesterday!

  • Comment number 1216.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 1215.

    It is incredible how inept the politicians are by non forcing through Parliament that not a penny of taxpayers money will ever again be used to save a Bank. This is the best regulation together with the public demand that the criminal bankers should go to jail and their process assets confiscated. The politicians must be corrupted not to act on this overwhelming public demand.

  • rate this

    Comment number 1214.

    Its not that long ago the politicians signed off a generous pension package to the Shred - those are the clowns that the banks want to regulate them.


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