Lib Dems push for bank reforms as 'arms length' strategy continues

Cable has pushed for retail/investment seperation for several years.
Cable has pushed for retail/investment seperation for several years.

By Ian Dunt

The Liberal Democrats are expected to push for a wholesale adoption of next week's report by the Vickers Banking Commission.

The party has engaged in an 'arm's length' strategy recently to highlight policy differences with the Conservatives ahead of next month's local elections, in which they are expected to suffer heavy defeats.

MPs have become increasingly vocal about concerns over NHS reforms, but the issue of banking offers the party a chance to flex its muscles on a subject in which the public is intensely supportive.


Business secretary Vince Cable and other senior Lib Dems were known to be disappointed with George Osborne's generous agreement with the banks in the past, particularly with regard to the Merlin deal.

But the Vickers report opens the space for debate on what many consider the most important issue - separation of retail and investment functions.

Many Conservatives are worried that any requirement for banks split their retail and investment arms would prove so costly that they might consider moving their operations overseas or be discouraged from lending to small and medium-sized businesses.

But Mr Cable has long lobbied for the change, insisting that it is the only way to prevent the taxpayer having to pay out again when risky decisions prompt a crisis.

Monday's publication is just of the interim report but it is expected to contain detailed proposals either to split retail and investment entirely or, more likely, to insist that the two functions are put into different subsidiaries within each bank.

The committee is chaired by Sir John Vickers, former head of the Office of Fair Trading.

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