Labour warns Osborne not to water down bank reforms

Shadow chancellor Ed Balls has warned the Government it risks losing Labour support for banking reforms if it waters down Sir John Vickers’ recommendations.

Speaking to the FT, Balls said he did not believe the chancellor was implementing the full recommendations of Vickers’ Independent Banking Commission report.

The ICB published its final report in November 2011, recommending ring-fencing banks’ retail arms from its investment activities. The Government brought forward the proposals in its draft banking reform bill published last month, set for parliamentary debate early next year.

Balls said: “George Osborne says there’s a consensus, but he’s not correct. We’ve said we’ve supported the implementation of Vickers letter and spirit and we don’t think he’s delivered that.”

He said Osborne was trying to “water down” the reforms by allowing certain derivative products to be sold in retail banks.

Earlier this month Osborne told the Parliamentary Commission on Banking Standards not to “unpick” Vickers by recommending full separation of banks.

Osborne told the commission that a consensus had been reached around ringfencing rules but clashed with chair Andrew Tyrie who insisted the consensus could be wrong.