A commission of MPs and peers, set up to review the banking industry in the wake of a series of crises and scandals, says government proposals for reform "fall well short of what is required".
In its first report, the Parliamentary Commission on Banking Standards welcomes Treasury plans to force banks to "ring-fence" customers' deposits to keep them safe if a bank fails; however, it says the ring-fence "needs electrification", with tough sanctions available to deal with banks that don't comply.
Andrew Tyrie MP, the commission's chairman, told Today presenter Evan Davis they wanted to give ring-fencing a chance and to change the culture in banking.
He said that if the reform is going to work "we've got to underpin it with much more robust rules and incentives to make sure the banks behave themselves in the long run".
He went to the warn that banks may try and find ways around the proposed laws in the future: "At the moment banks will probably behave, but in the long run they'll find a way of gaining the ring fence if they don't have a strong disincentive for doing so."
Jon Moulton, venture capitalist and founder of Better Capital, said that a complete separation between retail and investment banking should be implemented: "Why bother not separating... its just going to be futile if the fence is electric not to separate, it would be cheaper and easier."
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