Radical reform of UK banking system called for by MPs

30 March 2010

The UK banking system needs a radical reform if it is to avoid relying on taxpayer bailouts to survive future financial crises, a group of MPs have claimed in a new report.

According to the study by the Treasury Committee, a safe yet long-term set of reforms for the banking system need to be created.

Effective reform of regulations would mean that the financial services industry would be responsible for its own risk management rather than the government, the report revealed.

John McFall, Treasury Committee chairman, said: “History is littered with examples of financial boom and bust, from the tulip boom, to the South Sea Bubble, to the dot-com frenzy.

“The challenge is to make sure that the financial system itself is not, as it has been recently, a prime cause of such instability, and to
ensure that, in so far as possible, financial institutions bear the consequences of their own actions.”

Although the study recommended that the impact of risk needs to be reduced, the main objective is to ensure that the system is more resilient in the event of a future market collapse.

By Jim Ottewill

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