UK sets out new law to break up errant banks
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RBS is expected to be fined for attempted manipulation of benchmark interest rates this week. Osborne repeated his call for fines to be paid out of money that would have funded bankers' bonuses, saying it would cause "enormous public anger" if the taxpayer footed the bill.
Banks have come to accept the idea of a ring-fence, having initially resisted it. A source close to one of Britain's biggest lenders said the industry's main concern had been to have clarity over what future regulation will involve.
The source said that, with lenders already under intense scrutiny, Osborne's decision was a longer term move designed to prevent banks letting standards drop when attention is less focused on the industry.
Antonio Horta-Osorio, chief executive of Britain's biggest retail bank, Lloyds, had previously welcomed the ring-fencing proposals, saying it would lessen the chances of taxpayers' money having to be used again to bail out UK banks.
Striking A Balance
Legislation will go to parliament later on Monday, and Osborne said he expected it to be passed within a year.
Osborne, who delivered his speech at U.S. investment bank J.P. Morgan's offices in the southern English city Bournemouth, insists his reforms strike the right balance between responding to public anger and avoiding a populist over-reaction.
"Our country has paid a higher price than any other major economy for what went so badly wrong in our banking system. The anger people feel is very real. Let's turn that anger from a force of destruction into a force for change," he says.
"Any bunch of politicians can bash the banks ... but what good would that do our country? The jobs, the investment, the banking system we all need would go with it."
Shares in UK banks showed little reaction to the news. Barclays and HSBC was down 0.3 percent, with Lloyds down 0.2 percent and RBS down 0.6 percent ahead of its Libor settlement.
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