Banking reform? More like business as usual!

The Conservatives and Labour have both been setting out their plans for banking reform over the past week or two. First we had the government’s ‘Reforming Financial Markets’ White Paper – – with Alistair Darling setting out proposals that seem incredibly modest, relative to the scale of the recent banking crisis.

At a whopping 176 pages it’s not the friendliest White Paper you’ll ever see and its length and the jargon-heavy tone somewhat undermine its talk of ‘consumers being better informed’. Cynics might even suggest it’s designed to exclude consumers from actually engaging with the subject of banking reform. 

Then on 20th July we got ‘From Crisis To Confidence: Plan For Sound Banking’, the Conservative’s policy White Paper – Under a fanfare of ‘radical reform’ George Osborne set out proposals to abolish the tripartite system – with the Bank of England, the Financial Services Authority (FSA) and the Treasury jointly regulating financial services. The Tories would scrap the FSA (one more public body to go on their quango bonfire) but does little more than relocate civil servants from the FSA to the Bank of England.

With both sets of proposals the system that failed so completely and which has led to a global recession (not to mention public debt for many years to come) remains fundamentally unchanged. That displays no evidence of either party having learned from the recent past. Reaction to the Tory and Labour proposals tells its own story.

One City analyst called the Conservative’s proposals ‘quite sensible’ whilst the British Bankers’ Association welcomed the government’s plans. Quite how the Financial Times can call Osborne’s proposals ‘wholesale butchery’ – – is beyond me. Vince Cable seemed to sum things up quite well ‘This will be greeted with a sigh of relief in the City…it marks a return to business as usual’.

The underlying problems with the system remain undisturbed. Banks continue to fail to deliver financial service that people living in poor areas require, forcing the poorest in society to pay more for basic services. Talk of a ‘competitive and fair market for consumers’ seems absurd when there’s no ATM on an estate and the banks won’t lend to poor communities.

The government’s Banking White Paper is now open for consultation – and I’m sure the Conservatives would also welcome feedback on their proposals. It’s essential that we tell them what we think of their proposals and what sort of banking reform we’d like to see being introduced.

My view is that both these sets of proposals don’t address the fundamental problems with the system and do little to deliver real public benefit from the public bailout of our banking sector. Only community reinvestment legislation will address this systemic failure and ensure we do not repeat the mistakes of the past.


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