“The ring-fence is a tough and radical proposal. It is right that banking services for individuals and small businesses should be protected.
“As Sir John Vickers had made clear the stalled recovery is not an excuse for ducking reform. The Government should get on and legislate rapidly, as the report says, to provide certainty and the forthcoming Financial Services Bill is an ideal opportunity to do that. And it should accelerate action to introduce more competition and transparency into banking which will help consumers and small businesses.
“We should not lose the expertise of the Commission or impetus for reform so the Government should ask Sir John Vickers and his team to publish a report in twelve months time on what progress has been made in implementing and legislating for these reforms. To make sure that consumers and small businesses don’t end up paying for these reforms rather than the banks, the Government and the Commission ought to review whether sufficient progress on competition has been made in 2013, two years earlier than the report recommends.
“But as Ed Miliband has said this report should be the start not the end point for reform. To help get the economy growing again we urgently need to increase net lending to small businesses, which the Government’s deal with the banks has failed to do, and we need action on issues like pay and bonus transparency.”
John Denham MP, Labour’s Shadow Business Secretary, said:
“We welcome the publication of the Vickers report today, and its recommendations to ring fence bank retail and investment arms to provide more security in the banking sector.
“These are radical reforms and are a step in the right direction in addressing the problem of bank failure. But the extra money these reforms will cost the banks should not be passed on to the consumer or small business through increased lending rates. We need to see strong competition in the banking sector to reduce this risk and to improve services for small businesses. If it is clear that the Vickers recommendations on competition have not been successfully implemented, there should be a competition commission referral in 2013, not 2015 as has been suggested.
“And it doesn’t address the wider issue facing the UK economy today – bank lending to small and medium sized enterprises. The Tory-led Government needs to use its influence to encourage banks to change their culture so it is more focused on getting lending to SMEs. There are a growing number of voices that are saying we need to think more creatively, ensuring the banking system has a greater understanding of the needs and potential of key sectors of our economy. If the Vickers reforms are not successful in supporting the real economy, we will need to look at radical options to ensure they provide the support businesses need. The Tory-led Government needs to address these wider questions if we are to ensure a banking system that is fit for purpose in a modern economy.”