Banking Reforms Proposals Unveiled

Shadow Chancellor George Osborne has outlined proposals for regulating the UK banking system if the Conservatives win power.

Plans include the abolishment of the Financial Services Authority with its responsibilities divided between the Bank of England and a new consumer protection agency.

As Mr Osborne launched the white paper on financial regulation, entitled 'From crisis to confidence: Plan for sound banking', he said it would help lead the British economy out of the current crisis and back to confident growth.

At a speech in the Bloomberg offices, London, the Shadow Chancellor said the regulation system set up by Gordon Brown had failed.

He said: "We must never repeat the mistakes of the last decade, in which we built an illusion of growth on the biggest mountain of debt ever seen in an advanced economy. A fragile return to stability in the banking system must not be used as an excuse to reflate the debt bubble with just a few tweaks here and there.

"Responsibly managed and regulated financial services are a vitally important British industry that employs hundreds of thousands of people. Conservatives want that industry to succeed, compete and grow."

Mr Osborne vowed never to allow "ill-conceived or badly designed" new regulations, from home or abroad, to undermine the prospects of an internationally successful financial services industry based in London with other centres of excellence around the UK.

"Yet given the scale of the misery and hardship inflicted on the public by the failure of the existing system, reform must be far-reaching to match the scale of the problem.

"British financial services must be internationally competitive without putting economic stability at risk. Strong regulation by able regulators benefits the financial services industry as well as the wider economy," he said.

Treasury minister Lord Myners described the proposals as "window dressing" saying that they ignore the failures that led to the global financial crisis.

He added:"While George Osborne talks about who's in charge, we are focused on the lessons of the crisis, including greater scrutiny of the shadow banking sector and a crackdown on excessive city bonuses.

"The Tory proposals would abolish an independent, expert regulator, while diverting attention from banks that took excessive risks that led to this crisis."

Mr Osbourne stressed that the public now have a clear choice: "If they want to change the way their banks are regulated they need to change their Government," he said.

(GK/BMcc)