David Cameron has warned against "taking risks that put jobs at risk" as he highlighted the crucial role banks need to play to help economic growth.
The prime minister made his comments after the Liberal Democrat business secretary, Vince Cable, lashed out at the big British banks whom he accused of being "disingenuous in the extreme" in their claim that sweeping banking reforms could damage the economic recovery.
Cameron appeared to strike a different tone, which is likely to fuel reports that Conservative and Lib Dem ministers are at odds over the timetable for implementing reforms following intensive lobbying by the banking sector.
The Independent Commission on Banking is expected to recommend ring-fencing banks' retail operations from their investment arms when it reports on 12 September.
But there have been attacks on the proposals from the director general of the CBI, John Cridland, and British Bankers' Association's chief executive, Angela Knight.
Cridland has said taking action to reform the banks now would be "barking mad", while Knight warned imposing the measures on lenders risked denting confidence and cutting the supply of credit.
However, Cable said the fact that there were still fears about the collapse of big financial institutions was "all the more reason for grappling with this issue".
The Lib Dem minister used an interview with the Times(paywall) to hit out at banks using the economic turmoil in Europe to try to derail reform of the financial sector, amid fears the changes could end up being shelved until after the next general election.
He said that "louder and louder voices" were being raised among some of the big British banks warning that regulatory change in Britain would put the recovery at risk.
Cable told the Times: "It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen."
The Lib Dem business secretary has long favoured the separation of retail and investment banking. He added: "The governor of the Bank of England and many other people have been arguing that we have to deal with the 'too-big-to-fail' problem.
"We can't have big global banks with balance sheets bigger than British GDP underwritten by the taxpayer; this can't go on and it has got to be dealt with."
Cable acknowledged that any changes would require legislation and would not take place immediately.
George Osborne, the chancellor, has indicated he is likely to accept the interim recommendations in favour of ring-fencing high street banks, but he and Cameron are rumoured to be more receptive to bank demands for them to be given several years to deliver the "Chinese walls" while Nick Clegg, the Lib Dem deputy prime minister, backs Cable.
The Independent quoted a Whitehall source as saying: "There is a battle under way now inside the coalition. It is all about timing."
Pressed on Cable's comments and reports of coalition tensions over reforms, the prime minister said no decisions should be made until the publication of the report next week.
"Let's wait and see what that report says before we respond," said Cameron during a visit to the Mini factory in Oxford.
But in comments at odds with his business secretary, he issued a caution against any move that could undermine growth.
"I think the key thing we want from banks is lending into the economy so we can support growth and jobs, and we need to make sure we are not taking risks that put jobs at risk," said Cameron.
John Thurso, a fellow Lib Dem MP who sits on the Commons Treasury committee, told BBC Radio 4's Today programme that banking reform was "absolutely central" for the economy and said the Lib Dems were "absolutely right to keep pushing to make sure it doesn't go away".
He said Cable's comments about bank reform would chime with many of his fellow MPs. "Vince is really expressing the intense frustration that is felt by a vast number of MPs, not simply the Liberal Democrats but other parties as well, that through the summer they have met a great many businesses and, indeed, in my case I've met a great many regional bankers who are all actually saying the same thing.
"The businesses are saying, 'We can't get the money on terms that are anything like affordable', and the regional bankers are saying, 'Our head office is making us turn down deals that we think are good and would help and we would like to do.'"
Cable told the Times he did not expect another 2008-style meltdown in the banking sector, but acknowledged difficulties could still lie ahead for the British economy.
"To my mind, the greater worry is not a massive financial crisis again but it is a general slowing down of western economies, with all the problems that presents for employment and long-term dynamism," said Cable.
Cridland told Today that his organisation, which includes banks as members, was not opposed to reform but was concerned by the timing and whether the proposals on the table were the right ones.
"There is a real question mark, still, over whether the proposals are the right package and that's why we should be cautious, because I don't think it's absolutely clear that [Sir John] Vickers [chairman of Independent Commission on Banking] has got it right," the CBI chief said.
There had been a "radical slowdown" in the world economy since Vickers published his interim proposals, said Cridland, and there would be a "major problem" if growth stagnates, he said.
"At that point, my businesses being able to get cash from their banks is critical, and anything that makes it harder for the banks to keep the wheels of the economy well oiled is not good timing."
He added: "We do want reform for banks and we are prepared to pay a price for it and have been working closely with the Vickers commission … what I'm saying is business is not yet persuaded that these particular proposals are cost effective and if they are implemented at a moment of significant peril for growth in the British economy they could have unintended consequences in the short term."
The Treasury said: "It's too early to be talking about timings and no decision has been taken: the final report is not due until later this month."
by Hélène Mulholland and Ben Quinn taken from http://www.guardian.co.uk/politics/2011/aug/31/vince-cable-bankers-derail-reforms
The prime minister made his comments after the Liberal Democrat business secretary, Vince Cable, lashed out at the big British banks whom he accused of being "disingenuous in the extreme" in their claim that sweeping banking reforms could damage the economic recovery.
Cameron appeared to strike a different tone, which is likely to fuel reports that Conservative and Lib Dem ministers are at odds over the timetable for implementing reforms following intensive lobbying by the banking sector.
The Independent Commission on Banking is expected to recommend ring-fencing banks' retail operations from their investment arms when it reports on 12 September.
But there have been attacks on the proposals from the director general of the CBI, John Cridland, and British Bankers' Association's chief executive, Angela Knight.
Cridland has said taking action to reform the banks now would be "barking mad", while Knight warned imposing the measures on lenders risked denting confidence and cutting the supply of credit.
However, Cable said the fact that there were still fears about the collapse of big financial institutions was "all the more reason for grappling with this issue".
The Lib Dem minister used an interview with the Times(paywall) to hit out at banks using the economic turmoil in Europe to try to derail reform of the financial sector, amid fears the changes could end up being shelved until after the next general election.
He said that "louder and louder voices" were being raised among some of the big British banks warning that regulatory change in Britain would put the recovery at risk.
Cable told the Times: "It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen."
The Lib Dem business secretary has long favoured the separation of retail and investment banking. He added: "The governor of the Bank of England and many other people have been arguing that we have to deal with the 'too-big-to-fail' problem.
"We can't have big global banks with balance sheets bigger than British GDP underwritten by the taxpayer; this can't go on and it has got to be dealt with."
Cable acknowledged that any changes would require legislation and would not take place immediately.
George Osborne, the chancellor, has indicated he is likely to accept the interim recommendations in favour of ring-fencing high street banks, but he and Cameron are rumoured to be more receptive to bank demands for them to be given several years to deliver the "Chinese walls" while Nick Clegg, the Lib Dem deputy prime minister, backs Cable.
The Independent quoted a Whitehall source as saying: "There is a battle under way now inside the coalition. It is all about timing."
Pressed on Cable's comments and reports of coalition tensions over reforms, the prime minister said no decisions should be made until the publication of the report next week.
"Let's wait and see what that report says before we respond," said Cameron during a visit to the Mini factory in Oxford.
But in comments at odds with his business secretary, he issued a caution against any move that could undermine growth.
"I think the key thing we want from banks is lending into the economy so we can support growth and jobs, and we need to make sure we are not taking risks that put jobs at risk," said Cameron.
John Thurso, a fellow Lib Dem MP who sits on the Commons Treasury committee, told BBC Radio 4's Today programme that banking reform was "absolutely central" for the economy and said the Lib Dems were "absolutely right to keep pushing to make sure it doesn't go away".
He said Cable's comments about bank reform would chime with many of his fellow MPs. "Vince is really expressing the intense frustration that is felt by a vast number of MPs, not simply the Liberal Democrats but other parties as well, that through the summer they have met a great many businesses and, indeed, in my case I've met a great many regional bankers who are all actually saying the same thing.
"The businesses are saying, 'We can't get the money on terms that are anything like affordable', and the regional bankers are saying, 'Our head office is making us turn down deals that we think are good and would help and we would like to do.'"
Cable told the Times he did not expect another 2008-style meltdown in the banking sector, but acknowledged difficulties could still lie ahead for the British economy.
"To my mind, the greater worry is not a massive financial crisis again but it is a general slowing down of western economies, with all the problems that presents for employment and long-term dynamism," said Cable.
Cridland told Today that his organisation, which includes banks as members, was not opposed to reform but was concerned by the timing and whether the proposals on the table were the right ones.
"There is a real question mark, still, over whether the proposals are the right package and that's why we should be cautious, because I don't think it's absolutely clear that [Sir John] Vickers [chairman of Independent Commission on Banking] has got it right," the CBI chief said.
There had been a "radical slowdown" in the world economy since Vickers published his interim proposals, said Cridland, and there would be a "major problem" if growth stagnates, he said.
"At that point, my businesses being able to get cash from their banks is critical, and anything that makes it harder for the banks to keep the wheels of the economy well oiled is not good timing."
He added: "We do want reform for banks and we are prepared to pay a price for it and have been working closely with the Vickers commission … what I'm saying is business is not yet persuaded that these particular proposals are cost effective and if they are implemented at a moment of significant peril for growth in the British economy they could have unintended consequences in the short term."
The Treasury said: "It's too early to be talking about timings and no decision has been taken: the final report is not due until later this month."
by Hélène Mulholland and Ben Quinn taken from http://www.guardian.co.uk/politics/2011/aug/31/vince-cable-bankers-derail-reforms
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