TIME TO BREAK UP THE BANKS

Ahead of the Second Reading of the Financial Services (Banking Reform) Bill, Plaid Cymru has renewed the call for full legal separation of retail and investment functions of banks, to truly ensure that banks can never again game the system and gamble with ordinary depositors' money.

Plaid Cymru’s Treasury spokesperson Jonathan Edwards MP said:

"The Government's plan to ‘electrify’ the ring-fencing of the big banks’ commercial and investment functions, despite being a step in the right direction, does not go far enough.   

“A full legal separation of these functions is only way to ensure that banks behave and do not have to be bailed out again. Even though everyone is now focused on the recovery, the mess of the past has still not been sorted out and is proving to be a major economic drag.

"We know that bankers will try and game the system, history has proved this. The only way to truly protect against the banks being bailed out again – at massive cost to the taxpayer – is for full legal separation of retail and investment functions.  This is the only way to end moral hazard and to stop casino bankers using public money as a safety net.

"Despite the seemingly tough talk of ‘electrifying’ the ring-fencing of the retail and investment functions of banks – the measure still fails to break up the banks. All that the Government would do is reserve the right to break up the banks. Instead, George Osborne should be actually breaking them up.

"Breaking up the banks is what Plaid Cymru has argued for since the banking crisis and financial crisis began in 2008.

"Labour, meanwhile, presided over the financial crash of 2008 having been slavish adherents to light touch regulation and in awe of bankers and the City of London. Ed Balls has said that 'the jury is still out' and has only talked of demanding a 'reserve power' for separation of the banks, mirroring Osborne’s position. [1] 

“Clearly Labour are not committed to separating the banks. Both Tories and Labour are addicted to high finance.

"After the scandals of PPI mis-selling, LIBOR, countless bankers’ bonuses furores, the financial crash of 2008, the massive government bail-outs, and the economic crisis that we are still living through today – active full legal separation of banks’ retail and investment functions is what is required. My fear is that the financial sector will see Osborne's reserved right to break up the banks as an empty threat.

"Those that say that banks would relocate to other countries if full legal separation were to happen are wrong. Where else would bail them out? Banks must be made to serve the real economy instead of being too big to fail. The producing economies of the British State, such as the Welsh economy, are bled dry by the sectoral dominance of the banking sector, and the regional dominance of London and the South East of England.

"Rather than being the goose that lays the golden egg, the banks, for far too long, have held a golden gun to governments and ordinary working people.  This Bill is the one opportunity policy makers will have to protect the real economy from the excesses of banks in the future.  Otherwise it's only a matter of time before we will be asked to bail the bankers out again."