British minister takes tough line with banks

15th May 2010, Comments 0 comments

The business minister in the new British government warned banks on Saturday there would be no return to the "status quo" and they faced being broken up and having tougher curbs on bonuses.

Vince Cable, a veteran member of the Liberal Democrats, the coalition partners of Prime Minister David Cameron's Conservatives, told the Financial Times Britain was prepared to go it alone in restructuring the banking sector.

"We're not going back to business as normal," he said.

"The banking sector is going to have to accept disciplines on the way it operates, regulatory disciplines, and there is going to be restructuring."

Cable insisted the government's independent review into splitting up the big banks into their everyday retail divisions and their riskier investment arms would result in concrete changes, even if Britain failed to get global backing.

"We can't close down the possibility that unilateral action might have to be taken," he said.

Cable, a former chief economist for oil giant Shell, has long argued for banks to be broken up: but Britain's youthful finance minister, the Conservative George Osborne, has been more cautious about the idea.

The Liberal Democrat stressed he envisaged a partnership of equals with Osborne in bringing the banks under tighter control.

In another interview, with The Guardian, Cable said he and Osborne were united in their determination to break up banks and stop "vast" and "unacceptable" bonuses.

"The underlying assumption is that there will have to be restructuring in the banking system in order to make the system safe," Cable said.

"Vast bonuses, particularly where it involves cash payments, are just not acceptable and that will be stopped by the new government and properly regulated in the interests of reducing risk."

The centre-right Conservatives and centrist Liberal Democrats formed Britain's first coalition government since World War II after the May 6 general election failed to produce an outright winner.

Asked how his party could bring itself to ally with its old enemy, Cable told the FT: "We had to operate through our heads rather than our hearts."

© 2010 AFP

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