Plans to protect savers unveiled (From Bridport and Lyme Regis News)

Plans to protect savers unveiled

1:36pm Thursday 14th June 2012 in National News © Press Association 2013

Plans to protect savers if banks fail have been unveiled by the Government.

Financial Secretary Mark Hoban said customers' deposits would be better shielded from risky deals under a shake-up which would make clearer separations between investment and retail banks.

But shadow chancellor Ed Balls believed the revamp had been diluted.

Making a Commons statement, Mr Hoban said banks should hold more cash, making more money available to savers if an institution collapses.

He told MPs: "The deposits of individuals and their overdrafts and the deposits and overdrafts of small and medium-sized businesses will, in general, be placed in ring-fenced banks. To minimise the risks a ring-fenced bank is exposed to, it will be prohibited from conducting the vast majority of international wholesale and investment banking."

Mr Hoban said the 2008-9 banking crisis "exposed a great many flaws" in the system and said the reforms would mean investors "reap rewards when banks do well but take the pain" if they fail.

Launching the Treasury's White Paper following recommendations by the Independent Commission on Banking led by Sir John Vickers, Mr Hoban said: "We will ensure British banks will be resilient, stable and competitive and so attractive to investors at home and abroad."

The proposals would boost competition among banks, making it easier and faster for customers to switch accounts.

Mr Hoban added: "Our proposals are ambitious in scale, but balanced in impact. They promote financial stability while supporting sustainable growth and the role of the UK as the world's leading international financial centre."

But Mr Balls said: "Isn't the truth that having failed to deliver international agreement on tougher international banking standards, the Chancellor is now being forced to water down and fudge the Vickers' reforms?"