Banking reform : towards the right structure, second report of session 2012-13, report, together with formal minutes

The Commission welcomes the Government's acceptance of the principle that it's proposed framework for ring-fencing requires reinforcement.

The Commission sees no merit in the proposition that the first reserve power will create uncertainty for banks or put at risk their attempts to raise funds for lending.

That power will be a source of uncertainty only for those minded to take actions that conflict with the objectives of the ring-fence.

It is important that the regulator's powers to break-up a bank should be exercisable only after by an independent reviewer.

It is also important that the reviewer should be independent of Government.

The Government should make explicit provision in the Bill to enable the regulator to require a bank to divest itself of a specified division or set of activities which would fall short of the requirements of the first reserve power.

The Government's proposal for the periodic review to be conducted by the regulator is wholly inadequate.

Government has been at pains to make the case against the provision for full separation being implemented on the say so of the regulator. Instead, it is envisioned that the legislative provisions would be brought into force only in the light of the recommendations of the independent review.

It is essential that the timetable for the progress of the current Bill allows adequate time not only for the full scrutiny of the current content, but also for the addition of provisions to give effect to their recommendations