The time is now

Osborne has decided to secure the common good and encact, more or less, the banking reforms proposed by Sir John Vickers.

A piece in the Guardian mentions that Osborne “is to announce that he has faced down strong lobbying pressure from the City and is to press ahead with plans to ringfence the high street operations of Britain’s major banks from their higher-risk investment banking arms. In an attempt to prevent a repeat of the crisis that saw a run on Northern Rock and the part-nationalisation of Royal Bank of Scotland and Lloyds Banking Group, a government white paper to be published by the Treasury includes the bulk of the recommendations made by the independent commission on banking (ICB) headed by Sir John Vickers”.

The report goes on to mention how Osborne “has agreed to only three significant changes from the Vickers report, but has not changed his mind about the need to ensure that banks’ customers are protected from losses generatedby the speculations of investment bankers”. The article goes on to mention how “UK banks have been urging Osborne to ensure that the ringfencing does not impose onerous restrictions on their businesses. The chancellor said in the 2011 Mansion House speech that he supported the Vickers approach to banking reform and will say that Thursday’s white paper demonstrates how the coalition plans to have a new structure for the industry in place within seven years”.

It concludes that “The chancellor will tell City grandees at Mansion House that legislation must be on the statute book by the end of the current parliament in spring 2015 and implemented by 2019 at the latest”.

As expected the drumbeat on behalf of individualistic neoliberalism is not far behind these sensible and hugely necessary reforms. The opinion piece says that “With the world economy heading for hell in a handcart – all the conventional measures of financial and economic stress are again flashing extreme, pre-Lehman-like, danger – we can be thankful for one thing. Never mind the impending doom, those clever clogs at the Treasury have been beavering away on a programme of banking reform that ensures this kind of thing can never happen again”. Yet this is the argument used time and again to frustrate the common good and protect the citizens of the state, and therefore the state itself. If regulation is not to be implemented now then when?

He goes on to describe it as “an expensive waste of effort” going on to argue that  the “Government has already dealt with failings in banking supervision by deciding to get rid of Gordon Brown’s hopelessly misconceived Financial Services Authority and reuniting prudential oversight with its natural home at the Bank of England.Yesterday we were presented with yet another White Paper on financial reform, this one intended to give substance to the Vickers proposals for changing the architecture of the banks themselves. What’s proposed is essentially just the G20 agenda for winding up problem banks, but with bells and whistles attached – a capital surcharge, depositor preference and, most controversial of all, ring-fencing of ordinary retail banking from wholesale banking”.

He concludes that “There is, of course, nothing wrong with this kind of slamming of barn doors long after the horse has bolted. After messing up so monumentally, shredding the public finances in the process, bankers have surrendered any right they might once have had to self-governance. But if we take the banking crisis now tearing the eurozone apart as an example, there is not a single thing in this White Paper which would have prevented it”, adding later that the proposed reforms are useless and implies that they do not go far enough, when he says “Large parts of yesterday’s reform agenda are just costly window dressing, a triumph of political posturing over economic sense”.

He ends saying that the present crisis should take precedence over all else, but when growth begins again it will be too late and there will be no mood for regulation. Now is the time.


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