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 653.

    I think we need to diversify the economy, I mean fraud on a vast scale clearly works, as do the protection rackets (well, for the banks) but I think we could enhance our money laundering credentials further still by yet more relaxing of tax controls and dumping of non job HMRC staff.
    We could get Lord Ashroft to head up the initiatives - don't want any leaks do we?

    We get what we vote for?

  • rate this
    0

    Comment number 652.

    613.
    hitchbloke Excellent You have just described our useless, self serving, self satisfied, PM. I really wish the Tories would realise what assets
    call me Dave and his little rotund friend Osbourne are to the opposition.
    Perhaps when these jokers get thrown out in 2015 or earlier, they could get jobs as comedians.

  • rate this
    +2

    Comment number 651.

    One point that people seem to agree on is that Banking Culture needs to be changed. Well a change of culture always starts at the top. However the system at the top is on the whole corrupt and that does not just apply to banking, but across a lot of PLCs. Company Executives are just an employees of the company the same as a cleaner, and should be employed on the same T&C as every other employee

  • rate this
    +1

    Comment number 650.

    "641.
    trev2410
    Just now

    And who is going to capitalise these two new banks Ed?"

    Tax receipts from a bloated public sector, if he had his way. Balls doesn't understand that governments don't create wealth, industry and manufacturing do. Governments just spend and he should know all about spending, he was Brown's adviser after all. So much for a 1st in PPE from Oxford.

  • rate this
    +1

    Comment number 649.

    Amnesty for Bankers.

    Bob Diamond already did it. He was the first and the example to follow. He has secured protection from prosecution for himself and Barclays by ratting out the Libor scam.

    Come on. bankers! Do the decent thing and "do a Bob". You will be lauded as heroes and woe betide anyone in authority who tries to punish you. The people are with you. Seize the day!

  • rate this
    +6

    Comment number 648.

    Why do folk think they should borrow to set up in business? Surely it is better to work and save and to put up the capiltal yourself not to get into debt from the very beginning, or does that not have the excuse of a Limited Company bankruptcy to get you out of scrapes, leaving your creditors unpaid? Is that what it is all about??

  • rate this
    +3

    Comment number 647.

    "246.Mr T:I am sick of seeing people bang on about how banks are "starving companies of credit"...Sounds exactly like the way we got into this mess."

    No! There was no credit overreach amongst small businesses prior to the banking crash. Banks packaged, bought and sold toxic debt products, passing them round and round until they got found out. Osbourne would love your revisionist history!

  • rate this
    +8

    Comment number 646.

    632. Surely not: >thatcherism was rejected. Why have we still got it ?<

    because we only have 2 parties vaguely capable of running things, and people had got heartily fed up of Labours total muck-ups.

    about 25 years ago, an old hand I worked with said "the average british voter has a very short memory". It took me a few years to realise exactly what he meant, but by god he was right.

  • rate this
    +2

    Comment number 645.

    The whole western financial system, especially the anglo-american one, is dangerously manipulated, as is evidenced by the rigged Libor rates that underpin virtually the whole system. What are Bilderbergers Balls and Osbourne going to do to reform the system, apart from paying lip service?

  • rate this
    +5

    Comment number 644.

    You have to say it is all Balls ! The Labour party saying the banks need reform after the mess they made in 13 years is like asking to put the fox in charge of the hen-coop.

  • rate this
    +2

    Comment number 643.

    @67. Cutting the wages of those at the top is a good start, but before the bankers it should be the politicians who have major pay cuts. I want Politicians who care about our country, not lining their own pockets. Cameron, Clegg and Milliband say a great deal but get very little done. They are strangling our recovery by all their bickering and in fighting.

  • rate this
    -1

    Comment number 642.

    It is a proven fact that Ed Balls is far more qualified to talk about Ecconomics than George Osborne who has no qualification in Ecconomics at all.
    Osborne has a 1st in knowing all the dodgy people.

  • rate this
    +1

    Comment number 641.

    And who is going to capitalise these two new banks Ed?

  • rate this
    +45

    Comment number 640.

    A stupid idea and not even relevant. The problems are all with the investment arms of the big banks so breaking up their bread and butter High St business won't help and will hardly encourage them to go back to what banks should be doing. A typical politician's fallacy- something must be done, this is something, so this must be done.

  • rate this
    +4

    Comment number 639.

    615.Martin
    If the government creates two new banks, will they be used


    =>Would YOU use a bank run by today's politicians? I wouldn't. They've already shown via the expenses scandal just how honourable they are at heart. They can't even put together a computer system that works properly. It would stumble along and "lose" your data as it does. Think of the DVLA or the CSA

  • rate this
    +6

    Comment number 638.

    20.
    "It's not just banks, every big business is out to screw the general public..It's profit for greed sake society."

    I couldn't agree more. When my son lost his job recently he informed his motor insurer. Result: big premium increase. When he became employed again, they charged him £50 just to change "unemployed" to "employed". The greedy "financial industry" has no morals.

  • rate this
    0

    Comment number 637.

    Anybody seen Gideon ? or is he still sending out Smith to try and say anything sensible ?(Newsnight -ooooooh , painful to watch wasn't it !) regarding, what he has made a dog's dinner of, again!

  • rate this
    +7

    Comment number 636.

    There are only two reasons for making something more complicated than it needs to be. The first is idle boredom, brought about by too many people fulfilling a task. The second is deciept, trying to hide the obvious truth for personal gain. Bankers and politicians tend to make life complicated. Enough said.

  • rate this
    +4

    Comment number 635.

    246.
    Mr T Ralp Yes and most of us are sick of banks being bailed out, helped with QE, cheating, lying, committing fraud, and pretending they don't have cash when they would rather gamble than invest in the UK. I'm sick of whining, hard done by banksters.

  • rate this
    0

    Comment number 634.

    612. Petts Wood Dave
    Am I the only one to find it interesting that Balls is the both the subject and the content of a number of posts
    --------
    Now you come to mention it....

    I think the buck should either stop in the past,probably with Ed Balls, or in the future, say 2019, with whoever is in power by then, assuming they can't kick it further into the future.

    Fraud? What fraud?

 

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