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George Osborne says govt. legislation will electrify the ’Ring Fence’
5 February 2013
(EIRNS)—Britain’s Chancellor of the Exchequer George Osborne called for "electrifying" the ring-fence between retail and investment banking. According to the BBC Osborne was speaking at an event at JP Morgan’s office in Bournemouth, where he said, "When the RBS failed, my predecessor Alistair Darling felt he had no option but to bail the entire thing out. Not just the RBS on Britain’s High Street, but the trading positions in Asia, the mortgage books in sub-prime America, the property punts in Dubai. I want to make sure that the next time a Chancellor faces that decision they have a choice. To keep the bank branches going, the cash machines operating, while letting the investment arm fail." Posted on Her Majesty’s Treasury Website, Osborne’s speech went on, "No more rewards for failure. No more too big to fail. No more taxpayers forking out for the mistakes of others. The same rules for the banking business as any other business in a free market. "Today, we have published the legislation that will turn their ideas and this consensus for change into law. A law for the first time ever, to separate the retail and investment arms of banks, and erect a ring fence around the retail bank so its essential operations continue even if the whole bank fails.... "Today, we will go further than previously announced, enshrining in law these simple principles. I can announce that your high street bank will have different bosses from its investment bank. Your High Street bank will manage its own risks, but not the risks of the investment bank. And the investment bank won’t be able to use your savings to fund their inherently risky investments. "My message to the banks is clear: if a bank flouts the rules, the regulator and the Treasury will have the power to break it up altogether — full separation, not just a ring fence. We’re not going to repeat the mistakes of the past. In America and elsewhere, banks found ways to undermine and get around the rules. Greed overcame good governance. We could see that again — so we are going to arm ourselves in advance. In the jargon, we will "electrify the ring fence." "I want to thank Andrew Tyrie and the fellow members of the [Parliamentary] Banking Commission we established for help developing this important new idea." Tyrie had made a call for this last week. Osborne said the toothless Financial Services Authority would be abolished and as of April "the Bank of England will be in charge of keeping our financial system safe. With the authority that comes from its history, and the new powers we have given it for the future, the Bank of England will be the super-cop of our financial system. The Bank is ready." He also announced that the new Financial Conduct Authority, which also goes into operation in April, will function as a regulator. On the question of the manipulation of LIBOR, he announced that it will be made "a criminal offense to make misleading statements about LIBOR. Shockingly that was not the case before." [dea] |
