Bank reforms: no excuse for delay

Business secretary Vince Cable has warned banks that the government will press ahead with reforms for their sector despite their protestations that introducing regulation in the current atmosphere of economic turbulence is a bad idea.

The Independent Commission on Banking's final recommendations for reform will be published on September 12 and are expected to include a proposal to separate banks' retail operations from their more risky investment arms.

The British Bankers' Association believes banks should be reformed only after they have financed the global recovery. "If more regulation remains at the top of the list, then this will only have the affect of risking the recovery which is so essential to our future," it says.

But Cable condemns the banking sector's intense lobbying today in an interview with 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 government is playing high stakes.

The government faces a dilemma on banking reform, according to Norman Smith, BBC Radio 4's chief political correspondent. On the one hand, if they delay reform and there is another banking crisis, "the electoral repercussions could be devastating". But if they press ahead with reform and bank lending falls, "the consequences for the coalition could be equally serious". Smith concludes: "The stakes for the government over banking reform are dangerously high."

A battle over timing.

"Conservative and Liberal Democrat ministers are at loggerheads" over reforms, writes Andrew Grice in the Independent. He quotes a Whitehall source who tells him: "There is a battle under way now inside the Coalition. It is all about timing." While Vince Cable's Lib Dems want to introduce reforms now, the Conservatives want to do as the banks are asking and put the proposals in place over several years.

Reforms might actually boost bank lending.

The proposed banking reforms should not be delayed, writes David Prosser, also in the Independent. They "address competition as well as financial stability. We have already waited too long for measures that will begin to break the big banks' stranglehold on their industry - and implementing such reforms may help widen the availability of credit".

The right sort of reforms.

Andrew Lilico of financial consultancy Europe Economic tells the BBC that one of the proposed reforms, forcing banks to hold more capital in reserve, could "tip us into a great depression". However, he believes "the right sort of reforms" will help. "It's amazing that the crisis has gone on since 2007 and serious reforms have not yet been introduced," he says. That means "making it easier for banks to be allowed go bust safely without causing problems for taxpayers or the wider economy".

Banks are like car-makers with faulty brakes.

Lib Dem peer Lord Oakeshott is as keen as Cable to get on with reforms. "The banks are like car-makers who say they cannot afford proper brakes," he tells the Independent. "There is no possible excuse for delay. Every day that goes by with no action on the Vickers report puts the British economy at more risk." ·