Clegg calls for revolution in bank regulation
Liberal Democrat leader Nick Clegg calls for revolution in relationship between government and banks
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Tuesday, 07, Oct 2008 04:21
Liberal Democrat leader Nick Clegg has called for a revolution in bank regulation, saying the relationship between banks and government will never the same again.
Speaking exclusively to politics.co.uk just before Alistair Darling's Commons statement yesterday, Mr Clegg said wholesale reform of the banking sector had become inevitable.
"We will no longer regard banks as just another business, just another commercial sector," he said.
"It's clearly an area now where you need far more intelligent regulation to ensure that banks don't gamble with our money."
Mr Clegg argued the government had to protect the normal banking activities of consumers from the high-risk strategies employed in investment banking.
"The freewheeling, risk-taking culture of investment banking polluted the more conventional functions of retail banking, which is basically to look after our money, look after our savings and make sure they're always available to us," he said.
"I think we need to go right back to fundamentals and ask ourselves whether eliminating that distinction was right and, if it wasn't, what new firewalls we put in place.
"We need to revisit that," he continued.
"We need to do so without any prejudice, but we need to be radical."
The comments come as the global markets went into freefall following an uncertain weekend for European leaders.
In London, the key UK share index lost 7.85 per cent on Monday, its largest drop since 1987, while in New York, the Dow Jones fell below 10,000 points for the first time since 2004.
Mr Clegg said the Liberal Democrats' early warnings about the state of the economy had gone unheeded by government.
"It matters enormously that the Liberal Democrats were the only party to say the housing credit boom was unsustainable," he said.
"It matters enormously that we said there were measures which could have been taken four or five years ago to dampen the bubble in bank loaning and the bubble in over-borrowed customers taking on loans to go into the housing market."
Yesterday, the party's economic spokesman, Vince Cable, warned the government to be clear with the public about bank deposits, following confusion across the continent about whether Germany was protecting all of its deposits.
"People are anxious and the government needs to make it clearer than it is doing, what depositor protection actually means," he said.