MPs call for radical reform of banking
By myfinances.co.uk staff
The banking system needs radical, wide-ranging reform to curb irrational risk-taking and to dismantle the "assumption" that systematically important institutions will be rescued by the taxpayer if they are at risk of failure, a panel of MPs has said.
In its report, Too Important to Fail - Too Important to Ignore, the Treasury Select Committee concluded that there will always be a danger of banks collapsing, so the primary objective of the regulatory system should be to ensure that the wider system is resilient enough to cope with such an event.
Furthermore, it called for more of the risk of failure to be shifted to the banking sector itself, rather than the public purse.
The report backed the Financial Services Authority's work to develop "living wills" for all banks that would introduce legal frameworks for dealing with firms in trouble and also recommended cross-border cooperation on regulation, as long as it does not "become an excuse to stave off reform" in Britain.
Committee chairman and West Dunbartonshire MP John McFall said: "If international banking in the United Kingdom is to remain credible, reform must ensure that the taxpayer is better protected from picking up the bill."
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