Reforms to banks will go ahead – Cable
The Business Secretary warns bankers economic turmoil will not derail financial sector reform. Meanwhile, 30,000 struggling homeowners are to be told to cut spending or face losing their home.
Mr Cable was speaking ahead of the publication of a new report by the Independent Commission on Banking, due on 12 September. He said the fact that there are still fears about the collapse of big financial institutions is “all the more reason for grappling with this issue”.
It is expected that Sir John Vickers’ commission will recommend ring-fencing banks’ retail operations from their investment arms, and the Business Secretary said it was disingenuous for the banks to warn that the reform could damage the economic recovery.
‘Barking mad’
Mr Cable told The Times: “It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen.
“The governor of the Bank of England and many other people have been arguing that we have to deal with the too-big-to-fail problem.
“We can’t have big global banks with balance sheets bigger than British GDP underwritten by the taxpayer; this can’t go on and it has got to be dealt with.”
The comments from the Liberal Democrat cabinet minister, who has long favoured the separation of retail and investment banking, came after attacks on the proposals from CBI Director General John Cridland and British Bankers’ Association Chief Executive Angela Knight.
Mr Cridland said taking action to reform the banks now would be “barking mad”, and Ms Knight warned imposing the measures on lenders risked denting confidence and cutting the supply of credit to the economy.
Contacting struggling homeowners
As politicians and bankers argue over the best way to ring-fence the retail and investment banking sectors, it emerged more than 30,000 struggling homeowners are to be contacted in the coming months to warn them about the possibility of losing their homes.
UK Asset Resolution (UKAR), the holding company established to manage the mortgage books of the nationalised Bradford & Bingley and Northern Rock banks, has announced it plans to phone customers in an attempt to persuade them to change their behaviour ahead of any rise in mortgage rates.
“Some people won’t cope when interest rates rise, but for others there are remedies,” UKAR Chief Executive Richard Banks told the Yorkshire Post.
“They have been protected by low interest rates, but the consensus is that rates will start to rise late next year.”
UKAR plans to phone 2,000 customers a week to prepare them for when interest rates start to rise. The holding company serves some 800,000 customers and manages Bradford & Bingley and Northern Rock loans totalling £77bn.