Economic Policy: Banking Reforms Could Be Delayed Years



Pending bank reform could be delayed years under grounds that it will put recovery at risk

Pending bank reform could be delayed years under grounds that it will put recovery at risk

Government sources indicate that any real restructuring of the banking sector could be stalled for several years. The banking sector maintains that actions for reform now could handicap businesses, damaging economic recovery in the process.

Taking Advantage of the Crisis

Business Secretary Vince Cable said that the suggestion that the economy will fail if banks are given tougher regulations is “disingenuous in the extreme” and explained it as an attempt to “create a panic about something they know has got to happen.”

Cable told the BBC that the “uncertainty and instability in financial markets make it all the more necessary that we press ahead to make our banks safe and reform them.” Proposed bank reforms include ensuring that banks can boom or bust without passing the burden to the taxpayer.

Putting Recovery at Risk

On the other side of the coin, according to the CBI there has been a “radical slowdown” in the economy, and there is concern about the impact of heavier regulations, restricted cash flows, or “split ups” in leading banks on the fragile recovery. John Cridland, director general of CBI and in favor of holding back reforms, said “Anything which makes it harder for banks to keep the wheels of the economy well-oiled is not good timing.”

Prime Minister David Cameron said that the government will wait for the full Independent Commission on Banking report, due out 12 September, before responding to its recommendations. The Prime Minister came out last week to say what he “really wants” from our banks: “”First of all, to be lending into the real economy so we can support growth and jobs. But the second thing we do need to make sure that our banks are not taking risks that put the economy at risk.”

It may be these words that push back reform for years, as many lobbyists, as senior politicians, and financiers are stating that any new reform will put banks, and in turn, the economy, at risk.

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