INTERVIEW-UK bank reform won't be swayed by lobbying -Cable

Sat Mar 12, 2011 6:03pm IST

By Tim Castle and Matt Falloon

SHEFFIELD, England, March 12 (Reuters) - Aggressive lobbying will not compromise decisions on banking sector reform, British business minister Vince Cable told Reuters on Saturday, warning that policymakers had to deal with the "too big to fail" issue.

Britain's Conservative-Liberal Democrat coalition government has asked an independent banking commission to look into how to reform banks to protect the taxpayer and the economy from any future financial crises.

At the heart of the review, the final findings of which are due later this year, will be an assessment of whether banks should be forced to separate their retail and investment operations. An interim report is expected in April.

"I'm pretty confident that we've got a very robust, strong process that will not be deflected by lobbying," Cable said in an interview at the Liberal Democrat spring conference in the northern English city of Sheffield.

"I'm pretty confident that there will be recommendations that the government will feel able to act on because it's produced with a high level of authority."

Banks have warned the government that too harsh an approach could harm London's position as a financial hub.

There has been some speculation that an agreement between the government and bankers -- the so-called Merlin deal -- over lending, bonuses and tax earlier this year could lead to a watered-down reform package.

Cable said there has already been "a lot of lobbying in the background to try to compromise the banking commission" and that there was no "automatic link" between the commission's possible recommendations and future government policy.

However, he said neither the Merlin agreement nor lobbying would influence ministerial decisions.

"Given the Chancellor (finance minister George Osborne) and I set it up in the first place and appointed very authoritative people to it, it would be difficult to envisage circumstances in which the government would ignore its findings."

Cable supported the view of Bank of England Governor Mervyn King over banking reform, warning that "we have to get to grips with the 'too big to fail' problem".

(Editing by Hugh Lawson)

((UK bureau, uk.online@reuters.com, Tel: +44 207 542 7947)) Keywords: BRITAIN POLITICS/CABLE

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