18 December 2013

GOV.UK: Creating stronger and safer banks

The UK government wants to make sure that when banks make losses, retail customers aren't excessively affected and taxpayers' money isn't used to bail banks out. The Banking Reform Bill is due to come into force in early 2014.

Actions

The Banking Reform Bill, which is due to come into force in early 2014, will:

• introduce a ‘ring-fence’ around the deposits of people and small businesses, to separate the high street from the dealing floor and protect taxpayers when things go wrong;
• make sure the new Prudential Regulation Authority can hold banks to account for the way they separate their retail and investment activities, giving it powers to enforce the full separation of individual banks;
• give depositors, protected under the Financial Services Compensation Scheme, preference if a bank enters insolvency;
• give the government power to ensure that banks are more able to absorb losses.

To make the financial system more responsive to consumers, the government will:

• increase competition between financial services firms, including making it easier for customers to switch their current accounts with a 7-day current account switching service introduced in September 2013

The government is also:

• managing the government’s shareholding in certain UK banks
• working with other countries to respond to financial risks to the global economy
• reforming the way interest rates are set for loans between banks (known as the London Interbank Offered Rate (Libor))
• working internationally to make sure higher regulatory standards are applied to banks.

Full press release

More on Banking Reform Bill

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