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News - 15 May 2012

UK Government confident about its Banking Reforms

A government source has said that they expect their flagship banking reforms to go ahead despite opposition from Brussels to choose its own level of banks capital defences.

Chancellor George Osborne is determined to see the reforms through which include recommendations from the Independent Commission on Banking (ICB) for banks to be split on retail and investment lines.

They also include provisions where UK institutions would have to hold enough capital to cover a fifth of their assets as a safety net – above and beyond international standards.

Finance ministers from across the 27-nation bloc will meet in Brussels on 15th May to vote on a deal for new bank rules - the second attempt to reach agreement.
This disagreement over who has the power over how banks are regulated could further exacerbate the rift between the UK and the European Union following on from the PM’s opting out of an EU pact to shore up the Euro last year.

EU lawmakers are expected to give nations some flexibility on what bank buffers they impose but Britain wants Brussels to have even less of a say with the coalition government pushing through its own reforms one way or another.

It is a difficult position for the Government: London's bankers have been unhappy with the stricter capital rules the Chancellor wants to impose; an unruly faction of his Conservative party who want Britain to pull out of the EU or at least reduce the hold Brussels has over British laws and regulations, especially those that affect the City of London; some European countries worry, however, that higher capital ratios will make British banks appear safer and more attractive to depositors than their European competitors.

It should all be a lot clearer after the Tuesday meeting, or will it?

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