30 August 2011 11:50 AM

Banking battle ahead

It looks like George Osborne has an unenviable choice on the horizon with regards to banking reform.

Today it's the turn of the CBI to warn against a large-scale shake-up once the Vickers Commission reports in the coming weeks. Director General John Cridland said it would be "barking mad" to take action while the economic recovery was so fragile. It follows a similar argument yesterday from Angela Knight, the chief executive of the British Bankers Association, who said "now is not the time" for new regulation.

Both are evidence of a mounting campaign to hold back from an overhaul when Vickers reports - the commission is expected to recommend ring-fencing retail and investment banking operations.

Osborne will have to decide whether to push ahead with the recommendations and at what pace, and while he might share the concerns of the CBI and the BBA, he has another factor to balance - the demands of the Coalition.

Earlier this month Lib-Dem Lord Oakeshott warned it would be "curtains for the Coalition" if no action is taken.

"What would not be acceptable is for Vickers to come out with a radical solution and then the Government not to implement it immediately and in full," he told the Standard.

"Every Liberal Democrat from top to bottom is united about that. It will be absolutely critical - a Lib-Dem red line, bottom line, sine qua non - whatever you want to call it. That will be crunch time for the Coalition. If the Vickers Report is kicked into the long grass, it will be curtains for the Coalition."

It will be interesting to see what Osborne comes up with.

Craig Woodhouse
Follow me on Twitter @craigawoodhouse


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