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Bank reforms must press ahead, says Which?

Category: Business

Published: 3rd Jun 2012 03:27:34

Chancellor George Osborne should stand firm on commitments to reform the financial sector despite lobbying from banks, consumer group Which? has said.

It backs his plans to create a new watchdog and says it should protect consumers from "rip-off" charges.

The Financial Services Bill, which shakes up regulation in the UK, is due before the House of Lords and a banking reform White Paper is due out.

Banks claim the reforms may prompt big financial institutions to leave the UK.

Which? says the government must ensure consumers are sufficiently protected from a recurrence of the banking collapse that led to a costly public bailout.

Executive director Richard Lloyd said: "We have seen intense lobbying from the banks... including a crescendo of scaremongering over recent weeks on the risk of the end of 'free banking' and of big financial institutions leaving the country.

"The chancellor must resist buckling under this pressure."

He said without "strong action" to shake up the banking culture, consumers would continue to pay the price.

The group urged the government to keep "ordinary people" in mind when pushing through its reforms.

The Financial Services Bill will pave the way for the abolition of the Financial Services Authority (FSA) and creation of two replacement organisations.

It will replace the structure - introduced by the previous Labour government - under which oversight is shared between the Bank of England, the Financial Services Authority (FSA) and the Treasury.

Instead, the Bank of England will establish a new Financial Conduct Authority to enforce the effective and fair functioning of markets.

The Financial Policy Committee will be established to look after the general well-being of the UK financial system.

And a new Prudential Regulation Authority will monitor the performance of banks and other companies that manage significant risks on their balance sheets.

The bill will also give the chancellor powers to veto decisions made by the Bank of England when dealing with bank bailouts.

Financial institutions have campaigned against plans to put savers first if a bank becomes insolvent.

The government is also due to publish a White Paper on banking reform, introducing measures to prevent another banking collapse.

Mr Osborne is due to deliver his Mansion House speech on the economy on 14 June.

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BBC News, 2012. Bank reforms must press ahead, says Which? [Online] (Updated 3rd Jun 2012)
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