New banking reforms outlined by Chancellor George Osborne could see the cost of mortgages and banking charges rise significantly.
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The government’s new regulations are being proposed to give savers greater protection should banks fail. This is being done to prevent another banking meltdown as seen in 2008.
The chancellor is set to reveal the details in a White Paper on banking reform, following recommendations made by the Independent Commission on Banking (IBC).
However, while savers might benefit from the new reforms, homeowners could end up paying the price. The Treasury confessed that some customers might have to pick up the £7 billion bill for implementing the new reforms which could push up mortgages and loans.
The White Paper is expected to accept the majority of the reforms made by the ICB. It has been reported that some of the more radical reforms won’t come into force until 2019.
The reforms consist of imposing a ring fence around High Street retail banking operations and riskier investment banking.
The British Bankers Association has warned that the reforms could damage the banking industry and have a knock-on effect on the wider economy.
But ministers claim that the costs are worth paying to protect the rights of consumers from the pitfalls of the risky banking industry.
In his annual Mansion House speech Mr Osborne will say: “We’ve got to stop problems here in the City of London spilling onto our High Streets and putting taxpayers’ money at risk.
“I believe that we have found a workable way to solve what I called the ‘British dilemma’ – so we are proposing to protect taxpayers in a way that does not make the UK uncompetitive as a home of global banks.”
Other ICB proposals include making it easier for consumers to switch current accounts. It’s been found that, on average, UK adults switch their current account every 26 years largely because of the difficulty involved.
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