Osborne hails bank reform plans
Radical plans to ensure taxpayers are no longer on the hook for banking failures have been hailed by George Osborne as a "decisive moment" in the drive to overhaul Britain's beleaguered financial sector.
The far-reaching shake-up of the sector includes ring-fencing banks' high street divisions to protect them from riskier investment arms and setting aside more cash to cushion the blow of potential losses or future financial crises.
However, the Independent Commission on Banking's (ICB) vision for the industry could take eight years to implement and fuelled fears that the estimated £4 billion to £7 billion cost of implementing the changes would be passed on to banking customers.
The Chancellor, who has the power to act on or ignore the recommendations, said the report was "impressive" and "incisive" as he pledged to pass legislation required to implement the reforms before the 2015 general election.
But the Unite union said the proposals kick banking sector reform into "the long grass" and would bring immediate uncertainty to workers in the sector, while the CBI warned they could damage the UK's competitive position globally.
Jonathan Jackson, head of equities at stockbrokers Killik & Co, said: "It is probable that a proportion of these costs will be passed on to customers in the form of higher costs of banking, and hence the net impact on banks' profitability will be significantly less."
But commission chairman Sir John Vickers, former head of the Office of Fair Trading, said the recommendations would ensure banks are more self-reliant so the taxpayer "gets right off the hook".
He said the costs faced by the banking industry were a consequence of returning risk to where it should be taken, adding: "To the economy as a whole that is a benefit not a cost."
The British Bankers' Association (BBA), representing the country's banks, warned that careful consideration must be given to the reforms and their potential impact on the wider recovery.
The BBA said: "Any further reform measures adopted by the UK authorities need to be carefully analysed and compared with those agreed internationally. It is vital that the full impact any further reforms will have on the economy, the recovery and banks' ability to support their customers in the UK is understood."