Darling proposes tougher banking rules
Updated on 08 July 2009
Tougher supervision, help for consumers and no more pay deals for "irresponsible" banks: the chancellor pledges banking reforms to prevent future financial crises.
Chancellor Alistair Darling today announced a wide-ranging package of reforms for the banking sector as part of the government's response to the financial downturn.
They included measures to regulate bonuses and improved advice for consumers.
He told MPs that banks will be required to build up better capital reserves as a buffer against failure.
But he ruled out legislation to split up large and complex institutions, arguing this was a "simplistic solution" that failed to take into account the realities of the modern financial system.
Darling told the Commons that banks faced a "back stop" rule to prevent them lending too much.
The chancellor plans to set up a new council for financial stability, as well as forcing banks to hold more capital and draw up emergency plans for their own demise. Watch the full interview with Alistair Darling here.
"Financial institutions in many countries simply took too much risk," the chancellor said.
Darling also announced improved arrangements for savers, including an expansion of the Financial Services Compensation Scheme.
A new national money guidance service will give consumers "free impartial financial advice" and will be paid for by a levy on the financial sector.
The Financial Services Authority will be required to report each year on institutions' compliance with remuneration policy that rewards long-term stability.
Shadow chancellor George Osborne dismissed the proposals, saying they were a "totally inadequate response to what has happened ion the last two years".
Speaking to Jon Snow Osbourne said that he did not think the white paper did enough to ensue through regulation.
"The government has to take responsibility for the overall regulatory system…and that is where a profound disagreement exists between my party and the Labour party who seem to want to stick with a system that failed," he said.
"The [current system] is dysfunctional. The different institutions jealously guard their empires, there is rivalry, there is briefing against each other and crucially we do not know who is in charge in a crisis.
"The bank of England needs to have overall responsibility… it needs to know what is going on in banks…and then it can make judgements, not just about individual banks, but about the whole system, about the build up of debt across the system."
