* Business Secretary says bank reform must be enacted
* Adds pressure on Bank of England to reopen QE programme
* Wants to curb escalation of executive pay
(Updates after speech)
By Tim Castle and Mohammed Abbas
BIRMINGHAM, Sept 19 A $2.3 billion rogue trading
loss at Swiss bank UBS has reinforced the case for reform of
Britain's banking system and plans to separate their retail and
investment arms must be put in place, Business Secretary Vince
Cable said on Monday.
"At present, banks are offered a one way bet. If they gamble
and win - they fill up the bonus pool. But when they lose, the
taxpayer pays," he told delegates at his Liberal Democrat
party's conference in Birmingham, central England.
"If there were any doubts about the need for radical reform
the UBS rogue trader has dispelled them," he added.
The Conservative-led coalition government, in which the Lib
Dems are the junior partners, has said it will accept the
recommendations of an Independent Banking Commission.
Cable, a former economist, has consistently called for
robust action to control excesses in the banking sector.
"The Commission's key findings - to separate retail and
casino banking - must be put in place. Legislation will start
soon and be completed in this parliament," he said, indicating
that the reforms would become law by 2015.
Raising pressure on the independent Bank of England to
reopen its programme of quantitative easing to stimulate the
economy, Cable said the economy faced an "immediate threat" of
lack of demand, with consumers, companies and government cutting
"A lot of responsibility rests on the Bank of England to
relax monetary policy further linked to small business lending,"
Britain's first coalition government for 65 years says it
will stick to its deficit-cutting austerity programme, resisting
calls to relax the pace of spending cuts as the economy
continues to stall.
Cable and other Liberal Democrat ministers have in recent
days outlined ways to stimulate growth while keeping within
their tight fiscal plan, including prioritising infrastructure
projects and further QE to boost access to credit.
Cable trumpeted an announcement by luxury car maker Jaguar
Land Rover that it was investing 355 million pounds in a new
engine plant in central England, taking time out from the party
conference to visit a Jaguar plant.
The government is providing 10 million pounds to back a
project that will create 750 jobs.
Improvements in corporate governance would also help to
bring more stability to the economy and ease anxiety over a
growing pay divide, Cable said, outlining plans to give
shareholders more power over the pay packages of top executives.
"I am ... consulting on how best to tackle the escalation of
executive pay which, in many cases, has lost any connection with
the value of shares, let alone average employee pay," he said.
"The public will only accept continuing austerity if it is
seen to be fair," he added.
Pay at the top of Britain's biggest companies has soared in
recent years while salaries for workers have failed to keep pace
"The truth is that there are difficult times ahead, that
Britain's post war pattern of ever rising living standards has
been broken by the financial collapse," Cable said.