January 22, 2010 / 9:23 AM / 10 years ago

UK opposition backs Obama, seeks global bank reform

LONDON (Reuters) - Britain’s opposition Conservatives on Friday backed U.S. plans to curb the banking sector but said they would not disadvantage the country’s important financial services industry.

“President (Barack) Obama has created a lot of space for the rest of the world to come up with what I think would be a sensible system of international rules and agreements that creates a strong and competitive City of London but also a safely regulated one,” Conservative finance spokesman George Osborne told BBC Radio 4.

“I don’t want to do things that unilaterally damage the City of London, or unilaterally damage British banks,” Osborne added.

“If we need new rules they should be agreed internationally and I think the G20 meeting in South Korea in a few months time is a good place to try and map out those rules,” he added.

Osborne, in line to become finance minister if the Conservatives as expected win an election due by June, would not be drawn on the likely impact on specific British banks.

The state has spent billions of pounds bailing out the financial sector and has large stakes in Royal Bank of Scotland and Lloyds Banking Group.

Financial services minister Paul Myners said the Obama proposals were in line with government plans.

The Obama proposals, which need congressional approval, would prevent banks or financial institutions that own banks from investing in, owning or sponsoring a hedge fund or private equity fund.

The proposed rules also would bar institutions from proprietary trading operations, unrelated to serving customers, for their own profit.

Osborne said there was no need for a return to a complete separation of retail and investment banking.

“There are plenty of investment banking activities that are serving the needs of customers and clients,” he said.

“It’s the riskiest end of investment banking, it’s when they are making huge bets with the bank’s own money and the bank’s balance sheet that I think we need to separate from retail banking.”

Editing by Andy Bruce

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