Newspaper article International Herald Tribune

Planned U.K. Changes on Bank Rules Faulted ; Parliamentary Committee Warns Overhauls Don't Do Enough to Reduce Risks

Newspaper article International Herald Tribune

Planned U.K. Changes on Bank Rules Faulted ; Parliamentary Committee Warns Overhauls Don't Do Enough to Reduce Risks

Article excerpt

The warning comes as Parliament is set to debate new laws that outline how financial firms could be split up if they do not separate their investment banking units from their consumer banking operations.

Proposed legislation to protect the British financial services sector from future crises does not go far enough and may fail to stop banks from engaging in risky trading, British lawmakers warned in a report Monday.

The warning came as Parliament was set to debate the new laws, which outline how financial firms could be split up if they do not separate their investment banking units from their consumer banking operations.

The creation of a so-called ring fence between the different sections of banks' businesses is an attempt to shield consumers from an implosion set off by trading activity and other risky behavior that led to several big banks being bailed out by British taxpayers during the financial crisis.

In the wake of the multibillion-pound handouts to British banks and a series of scandals like the manipulation of benchmark interest rates that have rocked London's position as a global financial center, Prime Minster David Cameron created a parliamentary commission last year to review standards in the British banking industry.

In the report published Monday, members of Parliament said the government had failed to adopt several proposals from the commission intended to protect banks.

The recommendations include a regular independent review to check that banks are maintaining a separation between their risky trading activity and consumer deposits.

The commission also suggested that firms' overall leverage ratio, which measures the amount of risk banks undertake, should be higher than current international standards, and that British regulators should have greater powers to separate firms if they fail to maintain a division between the different business units. …

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