Banking reform designed to protect savers and depositors
The Banking Reform Bill set out in the Queen's speech will help protect savers and depositors but could prove costly to bank customers.
The legislation is designed to protect banks' retail divisions from trading losses made in their riskier investment arms and was first mooted by the Independent Commission on Banking (ICB) to help prevent further bank bailouts.
A new rule, known as the depositor preference, will ensure ordinary savings and deposit accounts are repaid first when a bank goes under.
PwC private business leader in Belfast Kevin MacAllister said the reform should ensure transparency in consumer banking.
He said: "Nothing here should come as a surprise, but implementing the proposals will prove costly, as the banking sector moves away from the free current accounts which customers have become used to."
In total, the new proposals will cost the industry £3.5bn to £8bn a year and potentially reduce GDP by between £800m and £1.8bn.
But Chancellor George Osborne said he believes the costs will be far outweighed by the benefit of avoiding future financial crises, which he said would reach £9.5bn a year on "modest" assumptions.
Economist John Simpson welcomed the separation of investment and retail banking activities.
"Anything that can encourage the promise of the banks to increase their lending, particularly to SMEs, is to be welcomed," he stated.
Given the complexity of the plans it is understood that the legislation may not hit the statute books until 2014 and the laws will not be fully implemented until 2019.
The potential annual cost to the banking industry of new reforms