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UK considers bank break-up threat

Friday, December 21, 2012 - 01:51

Dec. 21 - Britain needs to introduce legislation that could break up banks if standards slipped, according to an influential parliamentary panel. It said in a report that current reform proposals fall short, and regulators should be able to separate lenders' retail and investment operations if needed. Joanna Partridge reports

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Hit by a string of scandals such as rigging interest rates, it's been a tough year for British banks - and a tough few years since the financial crisis. An influential UK parliamentary panel was set up after the Libor scandal to look into banking reform. Now it's said the proposed reforms aren't enough - and Britain needs to bring in legislation to break up banks if their standards slip. The UK wants to go further than most countries in pushing through changes at lenders. It's making banks separate their domestic retail arms from riskier investment banking. The Parliamentary Commission on Banking Standards wants to "electrify" that ringfence, by giving regulators the power to separate banks forcibly if needed. Andrew Tyrie chairs the commission. SOUNDBITE: Andrew Tyrie, Chariman of the Parliamentary Commission on Banking Standards, saying (English): "Banks, if they have any incentive to do so, will find their way around rules. That's how we got in the mess we're in now, with the so-called special purpose vehicles, and the gaming of the so-called Basel rules, which were desgined to try and make sure that the banking system was safe. And that's led to a disaster, a global disaster of, if I dare use the phrase epic proportions. Well we can't afford to let that happen again." The commission is also considering next year whether to propose banning proprietary trading. Alastair McCaig from IG says banks should be involved in reform discussions. SOUNDBITE: Alastair McCaig, Market Analyst, IG, saying (English): "We keep going back to the banks with legislation and actions that we'd like them to impose and they keep coming back and saying no. Ultimately we'd like them maybe to take a little bit more of a proactive role." Britain's Treasury says it will study the report and respond early next year. The UK government wants to prevent taxpayers having to bailout lenders again - as happened in 2008 with the £65 billion rescue of Lloyds Banking Group and Royal Bank of Scotland.

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UK considers bank break-up threat

Friday, December 21, 2012 - 01:51

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