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UK approves "far-reaching" bank reforms

Monday, December 19, 2011 - 02:09

Dec. 19 - The UK government has announced plans to make banks ''ring-fence'' their retail operations from risk-taking arms and to hold increased levels of capital to protect the UK from a repeat of the 2008 crisis.

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It's Britain's biggest financial shake-up for years. The UK government has accepted a proposal to split UK-based banks in two - separating the retail operations from the riskier investment arms. The proposals were laid out by the Independent Banking Commission in September. Finance Minister George Osborne says they will ensure the UK remains one of the world's leading financial centres. (SOUNDBITE) (English): BRITISH FINANCE MINISTER GEORGE OSBORNE, SAYING: "It's important to know that this ring fence will not prevent banks from failing but it does mean that if banks get into trouble those elements of the banking system that are vital for families, businesses and for the whole economy can continue without resorting to taxpayers." The retail banks will have their own boards and be legally and operationally independent with limits on the amount they can lend the rest of the group. Larger retail banks will be required to hold equity capital of at least 10 percent - three percent higher than the level proposed by the international Basel III agreement. And there'll also have to be able to absorb losses of at least 17 percent. (SOUNDBITE) (English): BRITISH FINANCE MINISTER GEORGE OSBORNE, SAYING: "The British people are angry about what happened in our banks and angry at the politicians who let it happen. This coalition sees two parties working together to clear up the mess of the past and to create a banking system that protects tax payers and serves customers better." London's mayor Boris Johnson says he welcomes the reforms, as long as they don't go too far. (SOUNDBITE) (English): BORIS JOHNSON, LONDON'S MAYOR, SAYING: "By all means rebalance the British economy but don't kill the financial goose that lays the golden eggs for loads of people who are on very modest incomes but that rely on financial services." The UK's financial services industry supports 1.4 million jobs. Osborne points out the sector's balance sheet represents a whopping 500 per cent of Britain's gdp. The changes could cost the industry up to 8 billion pounds a year. But the Finance Minister believes the costs are "far outweighed" by the benefits of avoiding future financial crises. Shares in Barclays, Lloyds and RBS fell more than three percent after the announcement. Sonia Legg, Reuters.

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UK approves "far-reaching" bank reforms

Monday, December 19, 2011 - 02:09