LONDON – Britain should force all banks to split routine retail operations from riskier investment activities if a single lender abuses new rules designed to protect taxpayers, an influential panel of lawmakers said. The Parliamentary Commission on Banking Standards, which has been asked to find ways to reform banks, also said on Monday that Britain’s financial regulator should be given the responsibility to decide how far banks can leverage their capital for investment and lending. The government’s Banking Reform Bill is due to be debated in parliament on Monday. But Conservative MP Andrew Tyrie, who heads the commission, said that current proposals to change the industry fall short of what is required. “There remains much more work to be done to improve the bill,” he said in a report published ahead of the debate.
Britain is determined to prevent a repeat of the need for taxpayer-funded bank bailouts after the 65 billion pound ($97 billion) double rescue of Royal Bank of Scotland (RBS.L: , , , ) and Lloyds Banking Group (LLOY.L: , , , ) in 2008. The commission was set up amid public outcry after Barclays (BARC.L: , , , ) was fined for rigging global interest rates, the latest in a string of banking scandals including the mis-selling of loan insurance and complex interest rate hedging products to small firms. Finance Minister George Osborne said in January that he would take up a recommendation made by the commission that the government should have the power to break up any individual bank that tries to find a way around the new laws. The commission, which was asked to assess government plans before their introduction, wants the bill to go further and introduce rules giving Britain the power to break up every bank should even one institution break the rules.