UK 'must lead way on bank reform'

In a new report, the Treasury Committee calls for radical reform to reshape the banking system so risk is transferred away from the public and back into the financial sector.

John McFall MP, the chairman, told the Yorkshire Post: "We need to ensure that banks are stable and less volatile. We need to have a system whereby they can go bust in an orderly fashion.

"(The issue of reform] cannot be allowed to slip under the radar and go back to business as usual and taxpayers exposed in the future."

The committee looked at the range of reforms under consideration and assessed them against protecting the consumer, protecting the taxpayer, the cost of doing business and providing lending to the economy.

The report said evolutionary reform would not be sufficient and urged policymakers to introduce tougher structural changes to the banking system.

It backed plans for financial institutions to put in place so-called living wills which would allow the Government to inflict losses on all creditors of a bank, rather than the public purse.

International agreement on reform would benefit the City of London's status as a leading financial centre, but global prevarication "must not be used as an excuse to delay, or, at worst, prevent reform", said the report.

Meanwhile, the Government is considering plans to start offloading its stakes in Lloyds Banking Group and Royal Bank of Scotland just weeks after the general election, it was claimed yesterday.

UK Financial Investments is said to be looking at proposals to sell bonds that can be swapped for shares in Lloyds and RBS.