Banks which fail to ring-fence their risky trading activity from their customer facing retail end will be broken up, George Osborne will announce today.
The government will be introducing the Banking Reform Bill in parliament today, which will give new powers to the government and a banking watch-dog. The bill is set to take on board recommendations from the Vickers Report, which advised that banks which fail to properly ring-fence their own activities should be forcibly dismantled.
‘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,’ Osborne says. ‘In the jargon, we will “electrify the ring fence”.’
The intention is that the 2008 public bailouts of banks won’t be necessary in the future, as the public branches of retail branches can be saved whilst investment arms will be allowed to fail.