Cable Sees Truce With British Banks After Year of Conflict
U.K. Business Secretary Vince Cable
Matthew Lloyd/Bloomberg
Vince Cable, U.K. business secretary.
Vince Cable, U.K. business secretary. Photographer: Matthew Lloyd/Bloomberg
Sept. 19 (Bloomberg) -- U.K. Business Secretary Vince Cable discusses taxation, the Bank of England's quantitative easing program and the European debt crisis. He speaks from Birmingham with Andrea Catherwood on Bloomberg Television's "Last Word." (Source: Bloomberg)
Business Secretary Vince Cable said he’s hoping to put an end to a year of conflict with British banks after the adoption of a plan to force them to insulate their retail units from their investment banking operations.
Cable was speaking at a fringe event during the annual conference of his Liberal Democrat party in Birmingham, central England. It was at the same event a year ago that he warned of “a potential train crash ahead” if banks paid out large bonuses as the government pressed ahead with spending cuts. The business secretary has also repeatedly called over the past year for banks to step up lending to businesses to spur growth.
“I’d like to think that we can draw a line under lots of those controversies and move on,” Cable said at the event sponsored by the City of London Corporation last night. He said he hoped banks could be treated as “normal institutions, some of which, the retail banks, will be ring-fenced, and essentially underwritten by the state, and other bits, the investment banks, will become like hedge funds, they will compete, rise and fall, and they’ll just be normal businesses.”
Cable and Chancellor of the Exchequer George Osborne have pledged to implement by 2019 the recommendations published last week by the Independent Commission on Banking, chaired by John Vickers, aimed at shielding customers and taxpayers from another financial crisis. The plans will cost the industry as much 7 billion pounds ($11 billion).
‘Backstop Date’
Deputy Prime Minister Nick Clegg, the leader of the Liberal Democrats, told the BBC today he was “pretty confident” that 2019 was a “backstop date.” He said as long as the necessary laws were passed before 2015, “I suspect actually the changes will be implemented well before 2019.”
Cable said he’d like to be able to treat London’s financial services “as a very major national asset.”
“We are focused on working constructively with the government, regulators and international authorities on delivering financial stability and promoting economic recovery,” the British Bankers’ Association said in an e-mailed statement today. “We always welcome constructive engagement to meet these goals.”
Cable’s words were softer than those he used earlier yesterday addressing the main Liberal Democrat conference, when he said UBS AG (UBSN)’s $2.3 billion unauthorized trading loss revealed in London last week underlines the case for the bank overhaul.
‘Rogue Institutions’
“If there were any doubts about the need for radical reform, the UBS rogue trader has dispelled them, because we simply cannot have rogue institutions exposing taxpayers to the risk of exploding financial weapons of mass destruction,” Cable told delegates.
A 31-year-old trader has been charged by London police with fraud and false accounting.
Cable also again attacked banks over lending in his speech to Liberal Democrat activists.
“Productive British business and banking are currently at odds,” he said. “Banks operate like a man who either wears his trousers round his chest, stifling breathing, as now, or round his ankles, exposing his assets. That’s if they have any.”
Cable said that “we want their trousers tied round their middle: steady lending growth; particularly to productive British business, especially small-scale enterprise.”
At last night’s event, Cable said the whole financial- services sector in the U.K. “has been colored by the problem of the banks,” which he described as “institutions that are global in life but national in death.”
He said he hoped that the Vickers recommendations would deal with banks’ structural difficulties and allow the government to rebuild its relationship with the whole industry.
To contact the reporter on this story: Robert Hutton in Birmingham, England, at rhutton1@bloomberg.net; Thomas Penny in Birmingham, England, at tpenny@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
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