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The UK Banking Reform

The Banking Reform Act 2013 will be the greatest reform of the banking sector in UK history. The fundamental objective of this shift is to give banks boundaries in which they can buffer against market instability.

The measures taken to achieve this are through introducing criminal sanctions for “reckless conduct that leads to bank failure” [gov.uk]. Furthermore, the legislative changes will give greater governmental control with regards to increasing the accountability of banks, as well as their ability to absorb loss whilst protecting SME’s and taxpayers, through a ring fencing policy.

These changes aim at ensuring banks avoid the risk favouring, short-term gain focused strategies adopted in the past, which have created significant vulnerability.

The European People’s Party (EPP) has stated this new legislation to be

“the most comprehensive and most far-reaching banking regulation in the history of the EU.”

The implications of these changes for businesses are that if they are banking with a ring-fenced bank they will face the likelihood that their bank may not be able to provide a one-stop shop service. Whilst this may be a move away from convenience in one sense, it does ensure greater financial security for financial institutions, which ultimately contributes toward a strengthening economy that benefits young professionals entering the business world.


Photo credit: LendingMemo.com

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