Britain's treasury chief has fired a warning shot at banks across the UK that they could well be broken up, if they fail to play by new rules. George Osborne insisted that retail and investment divisions be separated.
British Chancellor of the Exchequer George Osborne on Monday warned domestic banks to comply with the new rules in force to regulate the banking sector in the wake of the global financial crisis.
He told staff at US investment banking giant JP Morgan in Bournemouth, southern England, that 2013 would be the year for Britain to reset its banking system. He warned lenders that they faced being broken up completely, if they failed to protect their retail operations from their much riskier investment arms.
"If a bank flouts the rules, the regulator and the treasury will have the power to break it up altogether, and we're not going to repeat the mistakes of the past," Osborne warned.
Banks not amused
Osborne added he expected legislation to this effect to be passed by parliament within a year's time. Risky investments undermined many banks' stability in 2008, eventually leading to costly taxpayer bailouts of two UK lenders.
Osborne's comments put him on a collision course with Britain's lenders, who claim the new legislation was no good. The British Bankers' Association said the decision was "regrettable" and would create massive uncertainty among investors.
"Above all, what banks and business need is regulatory certainty so that banks can get on with what they want to do, which is help the economy grow," the association commented, adding that the new rules would hurt the competitiveness of British banks and do little to make them more stable.
hg/ (Reuters, AFP, AP)