Called to account

BANKS might be staying tight-lipped yesterday about the new proposals for how they will run their future operations, but the reaction of the markets said it all.

The fact that shares were up across the sector suggests that the new rules put forward in the interim report by the Independent Commission on Banking will not be nearly as onerous as the banks expected.

But if the proposals – welcomed by Chancellor George Osborne in a way that suggests they will be acted on – are more than fair on the banks themselves, they should also offer ordinary customers a much better deal as well.

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The idea that banks should build a type of firewall between their retail and investment activities will give banks the freedom to engage in their wilder speculative activities without any risk that savers will end up losing money or that taxpayers will end up having to provide a bail-out.

At last the idea that banks are too big to fail and that, no matter what risks they take, the Government will rush to their rescue – as happened in the 2008 crash – will become a thing of the past should these proposals be enacted. And once banks are forced to run operations devoted entirely to retail customers, it is to be hoped that there would be a consequent improvement in service, particularly in the way that they look after their small-business customers.

The reforms look potentially very good for the region, too. It is gratifying that Halifax Bank of Scotland, for example, will face no further upheaval after it has already had to shed many jobs. And the proposals for Lloyds to sell off branches could be good news for Yorkshire Bank and its parent, Clydesdale, which is waiting to snap them up.

The results, then, should the proposals become law, would see a leaner, fitter and more competitive banking sector, benefiting both banks and their customers. No wonder, then, that the anticipated cries of protest from the industry were so muted.