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.

'Throttling'

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.

'Tardy'

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
    +3

    Comment number 213.

    PJB
    "I work with talented, bright, highly qualified, professional people who genuinely try to do the best thing by our customers."

    I would hazard that the key is 'customers'. I want a bank who will look after my money, hedge against inflation, and return a modest safe investment, not a bunch of wheeler dealer bonus driven chancers.

    Split the Mainwaring banks off from the Roulette banks.

  • rate this
    +3

    Comment number 212.

    Talking about a "revolution" eh. Well there are many of us that are prepared to man the fireing squad.

  • rate this
    +4

    Comment number 211.

    We already have a UK corporate bank, The Bank of England. Why doesn't it open itself up as a high street bank which everyone can use?

  • rate this
    +1

    Comment number 210.

    · The British Bankers Association (BBA) -- which oversees the daily benchmark setting process -- in April announced that it was bringing forward its annual review of the process. It stated that any member found to be deliberately misquoting would be banned.

    http://www.nytimes.com/2008/06/06/news/06iht-6oxan-LIBOR.13532018.html

  • rate this
    +3

    Comment number 209.

    The issue of incentives in selling financial services has been discussed for years. Some years ago the Financial Services Authority decided to stop commissions being given to brokers. It has taken years and has been fudged. It just shows how hard it is to go against the grain of current beliefs.
    Given the huge public money bailout of the banks isn’t a ‘culture’ change long overdue?

  • rate this
    +4

    Comment number 208.

    As it stand UK plc owns 84% of RBS, and its worth almost nothing, so force Nationalisation on it, and get sombody like Stuart Rose to run it, for working people

  • rate this
    +95

    Comment number 207.

    What needs to be installed is greater real time moderation of banking behaviour. We need banks, but unfortunately human nature is essentially greedy, and without adequate regulation, banking will always veer towards self service rather than supplying a service. To reinstall public confidence in the banking system, banks need to go back to supplying a service, rather than serving themselves.

  • rate this
    +2

    Comment number 206.

    This guy is showing his clay feet again. An idiot and thankfully a warning that augurs what he'd be like "leading" the country. He's a good opposition leader, yelping like a spaniel at the least provocation.
    He and others talk about these challenger banks - they had/have the option to give the Post Office a banking license but refuse to. It's virtually already set up. They're barmy the lot of em

  • rate this
    +13

    Comment number 205.

    If he wants to fix the sector take over the bank of england and tell the major banks they're not getting any more money. Then open a new bank under government control and use it to spend money into the real economy. Finally make it clear that the UK government does not guarantee private bank debt.

  • rate this
    +4

    Comment number 204.

    180PJB
    I work with talented, bright, highly qualified, professional people who genuinely try to do the best thing by our customers. One of our last great industries is going down the pan and there's nothing to replace it.
    =
    Then I suggest these bright guys work out what went wrong, fix it and save this (service) industry. If they can't do that then something's really wrong, don't you think?

  • rate this
    0

    Comment number 203.

    The comment on this thread is so depressing - cynical, jaundiced and unwilling to give any view that is alternative to current Tory thinking an airing. In this state of affairs, there can be no hope of a genuine change in our political or fiscal culture.

  • rate this
    0

    Comment number 202.

    Snake oil party number 2 has spoken

    Labour crippled the NHS with its PFI programme

    We need a different system, one where the politicians serve the people instead of the people serving the politicians and their cronies

    Direct Democracy

    The choice is simple

    Direct Democracy... or corruption and snake oil salesmen

  • rate this
    +6

    Comment number 201.

    Some simple suggestions:-

    1. Stop banks borrowing and make them subsist on the money investors entrust to them.
    2. Remove the role of Chancellor of the Exchequer.
    3. Create not-for-profit banks.
    4. Make politicians sign-up to a public service charter so we can have a formal say on their conduct.

    Everyone should have a vested interest in the running of the country.

  • rate this
    +29

    Comment number 200.

    Did you know the Bank of England is a Private Limited Company? Did you know that our government borrows ALL money it spends and that we are taxed to pay off the interest only and that the principle continues to go ever-higher on that debt? Did you know that bankers decide who gets what in our society because they decide who to lend to? Can you imagine the power that this gives the bankers?

  • rate this
    +3

    Comment number 199.

    The financial industry has only let us down in the same way that the last Labour government did. Wasn't it Gordon Brown who sold off the gold reserves when he was Chancellor? Wasn't it Gordon Brown's 'stealth pension tax' that cost us all £100 billion? And now MP's are jumping up and down about bankers? Hypocrites, the lot of them.

  • rate this
    +3

    Comment number 198.

    Surely all the banks should be nationalised. Then we can tell them to lend the money they have to people who won't pay it back - just what started the present financial crisis. By the way, I remember when calling someone a politician wasn't an insult.

  • rate this
    +13

    Comment number 197.

    181. Big John the Red
    ====
    Thank Baroness Thatcher for the loss of integrity in the City. Her dismantling of the UK finance regulation laws coupled with the City "Big Bang" meant that everything was controlled digitally instead of by integrity & intuition plus the market was left wide open for a US take over & the importation of the "never give a sucker an even break" mindset. It started there.

  • rate this
    +6

    Comment number 196.

    No, I cannot agree with this attempt to turn the blame on the public and away from the banks. They had the money and kept pushing it at the public in a totally irresponsible manner. The public could not borrow the money if the banks behaved like the used to.

  • rate this
    +6

    Comment number 195.

    Perhaps the Post Office should be allowed to return to its roots, it used to be a savings bank, a highly laudible institution. Then it was Girobank and this, as we know, was the slippery slope towards privatisation and look where that got us. I think the term of abuse Miliband is looking for is 'merchant banker'.

  • rate this
    +3

    Comment number 194.

    Steve 169 "substance is beginning to show"

    And of course this substance is derived from the wide ranging experience he gained in all his employments before he went into politics - where he put into use his economics double first practically before he became an MP. How many jobs were there - NONE.
    he speaks a good game but so did Blair and Brown and where did that get us - two wars and bankrupt.

 

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