There has been a lot of talk this week about the Banking Reform Bill and ‘electrifying the ring-fence’. George Osborne’s speech about separating the retail sector from the risky investment-banking sector of major banks has brought the Libor scandal of 2008 back to the forefront of the national consciousness. In what is surely not just a timely coincidence, also this week RBS has been fined a total of £390 million for its part in the banking scandal that saw executives from several of the major banking corporations fixing the interest rate on inter-bank lending. Evidence in the form of damning correspondence between banking bigwigs and Yen and Swiss Franc traders, has been published online by The Guardian, and the newspaper’s City Editor has stated on Twitter that the FSA confirm that Libor rate fixing was still ongoing in the UK until November 2010, and that RBS’s Libor related controls were still inadequate as late as March 2011.
Osborne’s Banking Reform Bill is a response to the anger felt by the UK public at the behaviour of the big banks that led to the Credit Crunch, and a valiant attempt to prevent the taxpayer from ever again having to foot the bill for banks’ risky and unethical actions. Under the bill, the investment and retail operations of all banking corporations are to be strictly separated, each with their own individual Chief Executive, and regulators will review the entire UK banking industry ever year to ensure that the measures are being followed, and are working effectively.
But, according to Anthony Browne, Chief Executive of the British Banker’s Association, the bill is bad economics and could damage London’s reputation as a global financial centre. He stated that the bill would prevent banks from lending money to businesses, which is what we need for the economy at this time.
Who do you agree with? Let us know your thoughts on the Banking Reform Bill in the Comments.