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NEF responds to Ed Miliband’s speech on banking reform

Responding to Labour leader, Ed Miliband’s speech on banking last week, Tony Greenham, Head of Finance at the New Economics Foundation said:

“Proposals to create a state-backed British Investment Bank, and calls for greater disclosure around bank lending are to be welcomed. They recognise that banking is a public utility, and competition alone cannot deliver a safe and useful banking system.

“Why is it that lawyers, accountants and doctors can be struck off for misconduct but bankers that damage our economy cannot? From LIBOR manipulation to the mis-selling scandals and banking bail outs, it is clear those in banking need to be held to a higher standard of consuct. system.

“Politicians have lagged behind public opinion on the need for root and branch reform of banking for too long. This speech marks a step change in the public debate about banking. Ed Miliband has become the first party leader to say that the Vickers commission should mark the start of banking reform, not the end. Those on the government backbenches who have also been pushing for genuine reform should welcome his speech and start to build a cross-party consensus to build a banking system fit for purpose.”

Lydia Prieg, Finance researcher at the New Economics Foundation commented:

“All of the proposals outlined by Ed Miliband today are feasible, in fact, countries like Germany, the US and Switzerland have all had them in place for several years.

“I would question whether a branch sell off is the right mechanism to achieve a better retail banking market. A few new challengers that behave the same as our existing banks will not change much for bank consumers or businesses. Miliband talked about the need for more mutuals, but very few mutuals, cooperatives or credit unions will be able to buy the branches he proposes to sell. A quick, effective way of creating more banks focused on local lending and different ownership structures would be to use our public stake in RBS to create a series of mutual, local banks.”

“One error in today’s speech was the regulation of investment banks. Ed Miliband was wrong to claim that the Vickers reforms will deal with too-big-to-fail problem posed by our huge investment banks. Simply separating retail and investment banking will not solve the problem of very large, interconnected investment banks that are, by themselves, too big to fail. This is incorrect and a dangerous misunderstanding.”

In May 2011, The New Economics Foundation helped to convene the Good Banking Forum, a  broad coalition of civil society which called for many of the proposals outlined by Ed Miliband last week. Read the report here.

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