Banking reform is going nowhere

After 12 years in office, one financial crisis and years of regulatory neglect, the Government finally unveiled how it plans to restore trust in banks. The big idea? To ask the banks what they think. Ingenious. Yes, the Regulating Financial Markets White Paper, which was published on Wednesday and contained 30-odd pages dedicated to protecting consumers, announced effectively nothing, except a series of consultations. The document was long on aspiration but short on policy. Of course, important decisions must not be made in haste, lest we end up with disastrous legislation (though that has not stopped ministers in the past). However, the White Paper gave the impression of a Government lacking conviction and leadership. For example, the publication says that the Government wants to make credit cards, current accounts and mortgages simple and more transparent — but ministers seem unable to say how, or when. The Treasury is considering a “traffic light” system, similar to food labelling, which may flag the riskiness of products. But it is unsure whether such a system should be voluntary or compulsory. A full consultation on the subject will take place late this year. But the reviews don’t stop there. There is another consultation planned to discuss the problems caused by lenders selling their mortgages to unregulated companies. Meanwhile, we will have to wait until the autumn for the Government to decide whether the Financial Services Authority should regulate buy-to-let and second-charge mortgages. The reason for the delay on this simple decision is not clear, but it is certain to involve consulting “stakeholders”, a government euphemism for lenders. We are already awaiting a consultation on the reform of residential mortgages.

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http://www.timesonline.co.uk/tol/money/article6683974.ece