Banks Warned - Flout The Rules And You Will Be Broken Up

Broken Glass

No more cock-ups or unethical behaviour.

U.K. Chancellor of the Exchequer George Osborne said for the first time regulators will get the power to break up banks, hardening legislation aimed at making lenders safer. He will also open up industry payment systems.

Bloomberg reports that Osborne said in a speech Monday the breakup powers will be added to the Financial Services (Banking Reform) Bill to be presented to Parliament this week. Authorities will be able to split up an institution that doesn’t abide by 'ring-fencing' rules to insulate retail operations from investment-banking activities. Bank payment systems will be regulated to make the system more responsive and allow new entrants into the industry.

'My message to the banks is clear: If a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether - full separation, not just a ring-fence', Osborne said in Bournemouth, southern England, according to a text released by his office. 'Banks found ways to overcome and get around the rules. Greed overcame good governance. We could see that again, so we are going to arm ourselves in advance'.

The tougher approach marks a change of stance by Osborne, who said as recently as November he didn’t want the proposals changed for fear of 'unpicking a consensus' developed in the last two years. Since then, Osborne has come under pressure from lawmakers in both Prime Minister David Cameron’s coalition government and the opposition Labour Party to do more as the Libor manipulation scandal intensified. The British Bankers’Association, the industry lobby group, said the new plan would mean banks have less money to lend.

Hit the link below to access the complete Bloomberg article:

Osborne Plans Bank Breakup Powers, Open Payment Systems

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