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UK gets tough on rule-breaking banks

Monday, February 04, 2013 - 02:27

Fab.04 - Britain is shaking up its bank regulation system following the 2008 financial crisis, when the government poured 65 billion pounds of taxpayers' money into bank rescues. Lenders which fail to shield their day-to-day retail banking from their risky investment banking arms face being broken up. Joanna Partridge reports

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Rigging the Libor interest rate, paying big bonuses and breaking money laundering laws. Just a few of the scandals to hit banking since the start of the financial crisis. The UK government is now shaking up its regulation system - to try and prevent future taxpayer-funded bailouts. SOUNDBITE: George Osborne, British Finance Minister, saying (English): "2013 is the year when we reset our banking system, so the banks work for their customers and not the other way round." The UK's Finance Minister is going further than expected with his reforms. GFX: George Osborne has already set out plans to make banks "ring-fence" their retail operations from their riskier investment banking arms. But now he says if a bank breaks the rules, the regulator and the Treasury will have the power to break it up and fully separate the two halves. That could see the government deciding whether a lender must sell off one of its arms. The reforms will hit major lenders like Barclays, HSBC and Royal Bank of Scotland. SOUNDBITE: George Osborne, British Finance Minister, saying (English): "I can tell you that your high street bank will have different bosses from its investment bank, your high street bank will manage its own risks, but not the risks of the investment bank, and the investment bank won't be able to use your savings to fund their inherently risky investments." The Bank of England will be responsible for monitoring the regulations. Ralph Silva is a banking analyst. SOUNDBITE: Ralph Silva, Banking analyst, saying (English): "The first time in any of the big G8 countries where the regulator is being given the power to effect dramatic change in the financial services industry." Banks initially resisted the ring-fencing idea, but have now come to accept it, although the British Bankers' Association called the plans "regrettable". Nick Beecroft from Saxo Bank says it's a way of getting them to be more responsible. SOUNDBITE: Nick Beecroft, Saxo Bank, saying (English): "You can have a world in which bankers feel they have the advantage of a safety net, the so-called moral situation, where you can take any gamble you want, any risk you want and if it goes right you get a paid a fortune in bonuses, and if it goes wrong the government will bail you out." Osborne's legislation is expected to be passed within a year. That's not soon enough for some. State-owned RBS is likely to be fined this week for attempting to manipulate the LIBOR rate. And Osborne wants the money to come from the bankers' bonus pot - not the taxpayers who bailed it out

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UK gets tough on rule-breaking banks

Monday, February 04, 2013 - 02:27

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