Vince Cable – “we’re reforming UK’s banks, and we’re getting on with it”

Liberal Democrat Business Secretary confirmed yesterday that the Government would accept, in full, the recommendations of the Independent Commission on Banking (ICB) Chaired by Sir John Vickers (see this video to see for yourself).

Anticipating Chancellor George Osborne’s formal announcement today, Vince told the BBC’s Andrew Marr that the  separation of retail and investment banks –  ‘something I and the Liberal Democrats have pushed on for a long time’ – will go ahead, indicating that the ‘angry heckling by banks’ (Marr’s words) had failed to blow the Government off-course.

Indeed Vince went as far as  to say that the necessary primary and secondary legislation would be completed within this Parliament – ‘we’re getting on with it.’ It’s likely that banks will be given until 2019 as recommended by the Vickers report to fully comply with said legislation, a timeframe that has disappointed senior Lib Dems. Nonetheless we have here a clear example of Lib Dem influence on government policy – from Conference to Cabinet to  legislation it would appear – that goes some way to making Britain’s banks safer and more effective.

So far so good, now for the nuts and bolts to fall into place.

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18 Comments

  • Bill le Breton 19th Dec '11 - 11:37am

    This is a golden opportunity for a great campaign that should start today for the immediate implementation of the Vicker’s reforms.
    We should press for immediate implementation regardless of what either the Tories want or that, unfortunately, our members of the government have accepted.
    No one in the streets will understand why the banks are being given so much time. “No to Twenty Nineteen! Yes to Now!”
    We need a monster petition – both an e-petition on the Downing Street site and a door to door petition collected by every one of our candidates standing in May – including the London Mayoral candidate.
    The campaign should be led by ALDC and be a grassroots uprising. Artwork should go out between Christmas and the New Year for a start in the first week of January.
    I am sorry Prateech, but this is not a time to wait for nuts and bolts, it is the people against the bankers, now!

  • Prateek Buch Prateek Buch 19th Dec '11 - 12:35pm

    I’m all for speedy implementation Bill!

  • Andrew Waller 19th Dec '11 - 12:47pm

    This is good clear news on why Liberal Democrats in government are better at protecting the public from casino backing than Labour ever was.

  • david thorpe 19th Dec '11 - 1:09pm

    uits physically impossible for them to be implemented now! first act of parlaimnet has to be passed so thats mid 2012 at the easrlist, then the banks will need time to work out in their individual cases how much they hav to raise,m then they will have to dispose of assets, and borow money, that takes years which vickers is well aware of and that why he suggested 2019

  • Andrew Suffield 19th Dec '11 - 2:03pm

    2019 is a generous timetable, but even an aggressive one wouldn’t be that much faster.

    Assume that the bill is passed in mid 2012. The earliest it could reasonable come into force would be the end of the year (acts of parliament usually have a start date of some months in the future, so the government has time to prepare guidance based on the final text of the bill, set up needed bureaucracy, etc). Then you need to allow banks some time to plan their actions – you don’t want hasty decisions with this sort of thing. Throw another six months in there. So we couldn’t expect action to begin before mid 2013. Then there’s a lot of contracts which will have notice periods of one to five years, which will have to be reorganised. If we went all out on forcing banks to hurry, and set up a (costly) process for them to appeal things which really needed to be delayed due to existing contracts, we’d be looking at 2014-2019. So it still wouldn’t be fully implemented until 2019. The most we can do is hasten partial implementation.

    (All estimates, may be errors – just some back-of-the-envelope analysis of what the rough timetable is going to have to look like)

  • Bill le Breton 19th Dec '11 - 3:50pm

    Try telling the public service worker who is experiencing a pay freeze now why bankers can be given seven years. Try telling the person about to retire who finds that her pension is worth 80% of what it was when the bankers fouled up why they should have seven years to do something they should have set in motion in 2008.
    Try telling the young person with little chance in the jobs market why those that got us into this mess are given seven years before they will be prevented from using everyone;s bank accounts to back their gambling habits.
    “Hands off our cash Now!” Great campaign. “Stop Using Our Deposits to Fund Your Gambling Habits.”
    Of course there has to be legislation and it is during the passage of that legislation that Lib Dems should be tabling amendments bringing forward implementation. Let the Tories vote against those amendments.

    And Prateek, isn’t this something SLF could be running with?

  • Richard Swales 19th Dec '11 - 4:22pm

    I repeat that we should withdraw the whip from all members of the House of Lords. Let them vote freely with their (liberal) consciences.
    Lord Oakeshott is entitled to his opinions, but as the media is only interested in him as they can describe him as a “senior” Lib Dem (what could be more senior than an ex-Lords-treasury spokesman) and thereby show the party as divided.

  • Tony Greaves 19th Dec '11 - 6:00pm

    Is this last posting in the right thread?

    Anyway the HoL whip is a matter for our peers, nothing to do with the rest of you!

    Meanwhile let’s get to grips with this, legislation in the next session and implementation at the end of the year.

    2019 is the long grass and with a majority Tory Government would never happen.

    Tony Greaves

  • Andrew Suffield.. Posted 19th December 2011 at 2:03 pm…………..
    …..2019 is a generous timetable, but even an aggressive one wouldn’t be that much faster…….

    Really? George Osborne has announced that RBS will be forced to reduce its ‘investment banking’ and wil, instead, concentrate on the ‘high street’. This drastic reorganisation will not, I suggest, start in 2019.

    The 7 year delay is just that; a 7 year delay!

  • Bill le Breton 19th Dec '11 - 6:31pm

    Table an appropriate council motion for its Jan meeting now. Press release first week of Jan.
    “This Council welcomes the Vicker’s Report and the Government’s decision to legislate in the New Year to curb the power of the commercial banks to use the depositis of the citizens of ‘X’ in their casino banking practices, but calls on HMG to accelerate the implementation of this legislation so that banks have to comply during the lifetime of the present Parliament. It condemns the the timetable that would allow banks until 2019 to comply. This is unacceptable to the hard working citizens of “X”. Banks must never again be free to us their depositors’ savings as gambling stakes in the belief that their loses will be met by the people of the United Kingdom.
    Start your local ward petition over the New Year holiday.

  • Simon McGrath 19th Dec '11 - 9:52pm

    @Bill – perhaps going into a recession is a stupid time to saddle banks with bilions of uncessary costs and by increasing their capital requirements reduce their ability to lend?

  • Bill le Breton 20th Dec '11 - 9:59am

    Morning Simon,

    What I think is imperative is the divorce of High Street banking from investment banking. Capital requirements are a distraction and a bit of a red herring. They can never prevent what went wrong in the mid-noughties. They are a fiction beloved of central bankers and politicians because they give them an illusion of control. They are loved by commercial banks because they know they are not true restraints over their activities.

    Banks are not really restrained by capital requirements – not in the real world. Banks create (by their marketing) or respond to the supply of quality borrowers with viable projects.

    In 2006 banks were chasing ‘investors’ down the streets begging them to borrow from them. “Have you a project that needs £50 million?” The sellers of loans were driven by targets set higgher up the chain. Those setting the targets or overseeing them within banks were divorced from the reality of failure by lack of experience of a downturn, hubris, vanity and a cushioning from the consequences of bad loans – in part because they thought they had invented a way to minimize that risk and because they knew they were too important to be allowed to fail.

    There came a point when those ‘cashing in’ their projects (selling assets, paying down loans, getting into cash) exceeded those borrowing to finance new projects/buy new assets and the ponzi bubble was deprived of its oxygen of new entrants.

    Money being destroyed began to exceed money being created. In the market, people felt this as weak and declining asset values, which pushed more people to the exit door.

    Much of this destruction had to happen, but the central banks needed to monitor this very carefully and ensure that NGDP (or aggregate demand) remained on its long term track. They didn’t. In fact by continuing to raise interest rates they made the rush for the exit door even greater and NGDP/Aggregate Demand fell off dramatically.

    Today the problem is that there just aren’t the viable investment projects about, mainly because their isn’t enough aggregate demand. Clearly, endeavouring to reduce fiscal deficits at the same time reduces AD further.

    So, banks don’t need freedom from capital restraints they need customers/clients with viable projects. Those customers will only come forward when they sense that there is potential demand for their new initiatives and that needs the central banks concertedly to declare that they will do whatever it takes to re-establish their country’s NGDP/AD to its position on the long term trend line. (£175-200b greater than it is now????)

  • Richard Swales 20th Dec '11 - 10:44am

    @ Tony – no it’s in the right place. The relevant link is the one that says that the timetable has disappointed “Senior Lib Dems”. So we really have no control over who is allowed to call themselves a “Senior Lib Dem”? If Lord Pearson for some reason decided to take the Lib Dem whip and then criticise the cabinet all the time would we just accept it? If someone wants to criticise the party all the time then fine, but why should they be allowed to use our own brand to do it? As a second point, having political party organisations in the current HoL defeats the object of its current function as a revising chamber.

  • David Allen 20th Dec '11 - 1:12pm

    From Andrew Suffield:

    “Assume that the bill is passed in mid 2012. M1.

    The earliest it could reasonable come into force would be the end of the year (acts of parliament usually have a start date of some months in the future, so the government has time to prepare guidance based on the final text of the bill, set up needed bureaucracy, etc). Then you need to allow banks some time to plan their actions – you don’t want hasty decisions with this sort of thing. Throw another six months in there. So we couldn’t expect action to begin before mid 2013. M2.

    Then there’s a lot of contracts which will have notice periods of one to five years, which will have to be reorganised. If we went all out on forcing banks to hurry, and set up a (costly) process for them to appeal things which really needed to be delayed due to existing contracts, we’d be looking at 2014 M3.

    -2019. So it still wouldn’t be fully implemented until 2019. The most we can do is hasten partial implementation.”

    What I’ve done with your text is put in milestones M1, M2 and M3, when we could demand evidence of specific, measurable progress along the road to reform. Could that be the basis of a practical response in favour of action that is as urgent as feasible, is going to be genuine reform, and isn’t going to be a playing-out-time charade?

  • Bill le Breton 20th Dec '11 - 6:34pm

    David,
    Announce now that those customers of commercial banks who have separated their HIgh Street Banking activities from their Investment banking by December 31st 2012 will continue to have protection under the “deposits’ protection provisions” and those who don’t will not. The customer will then remove their savings/deposits to those banks which comply.
    I happen to think every High Street Bank would meet such a deadline – but then, if they couldn’t they’d be free to try and explain why to their customers and to reasure them that their banking practices are such that depositors do not have to fear for their savings.
    B

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