By Gerald Heneghan
George Osborne is set to warn banks that they risk having their operations broken up if they do not separate their investment activities and retail operation today (February 4th).
The chancellor will not be advocating a full detachment, but will outline legislation that takes a step towards mitigating the risks posed to savers’ money by investment.
“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 ring fence,” he is expected to say.
It is thought Osborne will shy away from blaming banks for their failings and instead hit out at Labour over poor regulation in the run-up to the bailout.
The chancellor is also set to unveil changes to the Financial Services Authority, as well as granting more powers to the Bank of England.
During the speech, which will be delivered to JP Morgan traders in Bournemouth, he will outline the reform bill, which will enable a banking watchdog to take action if financiers fail to separate their investment and retail operations.
The proposals follow the release of a report from the Parliamentary Commission on Banking Standards, which was launched after the Libor rate rigging scandal and urged the government to institute powers for intervention, should banks fail to comply with the changes.
“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 ring fence,” the chancellor is set to say.