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Banking reforms seen as a boost for savers and depositors

Chancellor George Osborne has announced changes to banking that should help savers.

 
Banking reforms seen as a boost for savers and depositors

Chancellor George Osborne has announced the Banking Reform Bill that will not only see savers’ deposits safeguarded but also enforce rules to make it easier for consumers to switch bank accounts.

The Banking Reform Bill re-treads the well-worn ground of ring-fencing banks’ risky investment operations from consumers’ money, with Osborne threatening a ‘complete separation’ of banks’ different arms should they flout the new rules.

He warned that there will be no more ‘too big to fail’ and that no government would ever again bail-out an entire bank.

‘When the RBS failed, my predecessor Alastair Darling felt he had no option but to bail the entire thing out. Not just RBS on the high street, but the trading positions in Asia, the mortgage books in sub-prime America, the property punts in Dubai,’ said Osborne.

‘I want to make sure that the next time a chancellor faces that decision they have a choice. To keep the bank branches going, the cash machines operating, while lettering the investment arm fail.’

This is not new territory, and the Parliamentary Commission on Banking Standards, set up after the Libor scandal, has already called for a reserve power to separate the banks if they did not implement reforms.

Andrew Tyrie, who chairs the commission, said in a report in December that the ring-fence around consumer deposits should be ‘electrified’ to protect not only the banks’ customers but the taxpayer from the risk of another bailout.

Although the impact of the ring-fence may seem abstract to bank customers, there are also some practical banking changes expected that will benefit consumers.

One part of the Bill will see bank switching reduced to seven days meaning it will be easier and faster for consumers to move bank accounts. The Office of Fair Trading has already made its concerns about competition in banking known, and told banks 'significant changes' are required and a shift in focus to customers' needs.

Craig Donaldson, chief executive of Metro Bank, said: ‘We welcome today’s increased focus on switching in the current account market. The ‘seven day switch’ is an important move that will do great good by increasing public confidence in the switching process.

‘Customers tell us that they’re worried about the process when in fact it is straightforward and simple, and we believe that it’s this lack of confidence that is significantly holding up movement in the market.’

Sylvia Waycot of Moneyfacts.co.uk, said the Banking Reform Bill would ‘please the scandal-weary consumer and at last allows some hope of repair to the damaged reputation of banking as a whole’.

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7 comments so far. Why not have your say?

Ian Phillips

Feb 04, 2013 at 16:26

What a load of twaddle........make it easier to switch Banks? How?.....protect Savers Deposits? they're already protected, aren't they?........increase saving rates? How? when the taxpayer is subsidising cheap funding for Banks to lend out............total twaddle!!

None of this is the point of this proposal, is it?

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Anthony Tinslay

Feb 04, 2013 at 16:30

One thing not mentioned but seemingly more inevitable as time goes by. - the question of "Free Banking". With ring fencing and easy transfers, Banks are not likely to be happy in providing free banking to any ordinary current account customer eho keeps his account in credit and enjoys all the free services e.g. ATM, Cheque book, Direct debits, statements etc. BUT - which bank will jump first?

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joe stalin

Feb 04, 2013 at 16:37

A "Chancellor" by name a clown by profession. All this signals is interference for the sake of it. There was nothing new or vaguely interesting in what Osborne has to say it was just vacuous political nonsense. What he appears to have overlooked is that banks operate in an international arena in fact London prides itself on being the number 1 financial center in the world. For some body who was educated at Slough Comperhensive you might have thought he woould now something about shooting a gun would n't you. Apart from making sure the safety catch is off befoer you pull the trigger you also make sure you aim it skywards and not at your own feet. Out with the fairies and not fit for purpose.Time for a leadership challenge and a proper cull .

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Alan Tonks

Feb 04, 2013 at 18:30

What on earth is this so-called Chancellor talking about; helping savers I do not think so.

It was all the funny money feed by the Government into the banks, which allowed the banks to give savers a derisory rate of interest.

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Alan Tonks

Feb 04, 2013 at 18:30

What on earth is this so-called Chancellor talking about; helping savers I do not think so.

It was all the funny money feed by the Government into the banks, which allowed the banks to give savers a derisory rate of interest.

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steven fieldfare

Feb 05, 2013 at 11:13

The only thing that matters to savers is that interest rates are raised to give a return above inflation for, say, committed 6 months or 1 year deposits. If that means raising loan rates to overborrowed mortgagees so be it; they have already had a cheap ride for sufficiently long to take defensive positions.

If argument persists that lending rates need to stay low for business to borrow and the economy to recover, then split business and domestic loan rates. As for inward investment, is it not better to attract funds seeking real returns than funds seeking cheap buyout loans?

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rik

Feb 07, 2013 at 20:56

I agree with Steven F.

Now I've paid my mortgage off AND have some cash interest rates should go up ; )

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