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 253.


    Why are the BBC yet again leading with labour party propoganda .

    It was The Mail on Sunday that gave Miliband a platform for this "propoganda".

    No doubt you will be well aware of that.

  • rate this

    Comment number 252.

    Ooooh a politician proposing bank reform - that's a bit radical isn't it?

  • rate this

    Comment number 251.

    Miliband and Labour are a joke. Its Labour who forced HBOS and Lloyds to merge.... And now they want them broken up. Go figure

  • rate this

    Comment number 250.

    Iceland has shown the way.

    Follow their lead and actions and some of the wrongs can be righted across society. It will never happen though as too many snouts in the trough across ALL the political parties.

  • rate this

    Comment number 249.

    It's all very well to propose setting up these 'challenger banks' (whatever that means? I thought competition in banking was supposed to provide 'challenge'. How's that going by the way?), but wouldn't they just be subsidiary companies of the existing, almost certainly criminal, global banking cartel?
    And even if they weren't immediately, wouldn't they very soon be?

  • rate this

    Comment number 248.

    Years ago an ex-colleague working in an African state refused to pay bribes to politicians. He was removed from his post within 3 months and told “Don’t be stupid man, that’s the way that it works here.”
    The LIBOR rates and fleecing SMEs, the destruction of banks’ liquidity through fraudulent derivatives, flogging dodgy mortgages, etc. “That’s the way that it works here?”

  • rate this

    Comment number 247.

    perhaps we should ban MP's who do wrong-wouldn't be many left!!!

  • rate this

    Comment number 246.

    I am sick of seeing people bang on about how banks are "starving companies of credit" and "refusing to lend". So you'd like banks to lend to businesses that can't afford the repayments? Sounds exactly like the way we got into this mess. Also, the FSA's increasing capital requirements mean that banks have to either raise more capital (impossible in the market) or cut back on lending instead.

  • rate this

    Comment number 245.

    Once again Sillyband jumps in with both feet. He is saying nothing that hasn't been said before. If there is a bandwagon rolling, Sillyband jumps on board. No ideas, no solutions, nothing new just waffle for the sake of waffle.
    "Lord protect us from the outpourings of the Sillyband".
    Ancient English prayer (slightly modified)

  • rate this

    Comment number 244.

    Bankers time is up. The Boards & paybodies of all the banks now need to stop thinking they will award themselves massive bonuses, amend their contracts etc. They have to provide a quality service to customers! Bankers arrogance is what got us here - you are certainly not the best - you are the worst type of human beings imaginable - totally greedy. You reap what you sow - total public disgust

  • rate this

    Comment number 243.

    The British Bankers Association (BBA) -- which oversees the (Libor) benchmark setting process -- in April (2008) 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.

    2008! We are now in 2012. Why are we still waiting? And how can Diamond claim he didn't know about it if it was in the NYT in '08?

  • rate this

    Comment number 242.

    The banks should've been nationalised in the crisis anyway - the government give them taxpayers' money then beg them to pass it on to businesses (I smell corruption, not that we'll find out thanks to Shameron ordering the whitewall whitewash). Bob was paranoid about being nationalised so cooked the books to make Barclays more attractive to the Qataris.

  • Comment number 241.

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

  • rate this

    Comment number 240.

    The Pub Industry benefited from a similar initiative.
    The big brewers were forced to sell off their pubs to Punch Taverns / Enterprise Inns etc..
    To reduce the Banker's monopoly further, everything could be split into different operating companies as per the railways - premises, staffing, computers, management, cash dispensers, and back office admin could all be separately owned and operated.

  • rate this

    Comment number 239.

    Labour and Miliband have so little credibility on the economic front that any policy they come up with, which may in itself have merit, is treated with disdain and ridicule by most of the electorate.

  • rate this

    Comment number 238.

    We urgently need more democracy, more decisions to be taken by the populace after proper debate. More air time given to debate and force political leaders to face the public. That would open up the politicians to proper scrutiny and perhaps we could start to get away for m the yah boo childish behaviour we see in PM question time. ,

  • Comment number 237.

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

  • rate this

    Comment number 236.

    I really cant take Ed Milliband or most front bench Politicians of all parties seriously these days.

    Why you ask? Its because they have little, or no real experience of business, or ethics and that's the problem with the UK today.

    We need Politicians with 20 years of real business experience, not 5 to 10 years of being a speical "advisor".

  • rate this

    Comment number 235.

    predictive text
    not deflation
    chance would be a fine thing
    debasement devaluation inflation can all be measured
    if economics is to have any value
    it's ideologies have to pass the reality test
    I would advocate local banking
    not for personal but to connect personal and business sector at a local level like old local mutuals it used to work ok

  • rate this

    Comment number 234.

    Ed Milliband seems to come out every Sunday just to state the obvious.


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