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Plans set out to ring-fence savings

Plans set out to ring-fence savings

Category: Savings

Updated: 14/06/2012
First Published: 14/06/2012

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The Government has set out plans to ring-fence consumers' savings from riskier operations, it was announced today.

Mark Hoban, the Financial Secretary to the Treasury outlined the proposals to MPs in the House of Commons today, with the plans following the recommendations of the Independent Commission on Banking (ICB).

Under the proposals, banks will be forced to ring-fence their retail deposits, keeping them separate from riskier business arms, such as investment banking.

The Shadow Chancellor, Ed Balls, criticised the Chancellor of the Exchequer, George Osborne, for not unveiling the proposals to the House himself, and accused the Government of watering down the recommendations set out by the ICB.

Mr Osborne will announce the proposals at his annual Mansion House address tonight, saying the move will stop problems at the banks 'spilling onto the High Street'.

Under the new laws, savers will also be the first in line to be compensated should their provider run into trouble.

"Our proposals are ambitious in scale, but balanced in impact," Mr Hoban said.

"They promote financial stability while supporting sustainable growth and the role of the UK as the world's leading international financial centre."

Vince Cable, Secretary of State for Business, Innovation and Skills, described the proposals as a 'major piece of reform'.

The proposals will also attempt to introduce some competition into high street banking, making it easier for people to switch providers.

As part of the effort, the Bank of England and the Financial Services Authority will be asked to look at what measures could be introduced to encourage new entrants to the retail banking market.

The proposals are expected to be implemented by the end of the current Parliament in 2015, with the banks expected to fully comply by 2019.

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