The new UK and US "action plan" for safer banking

Five questions answered.

The UK and US have issued a joint paper outlining an action plan for flagging banks that hopes to protect the tax payer from costly financial bail outs.

Who exactly has issued this paper?

The Bank of England and America's Federal Deposit Insurance Corporation.

What are the key points of this ‘action plan’?

Key points include, establishing a single key regulator that will take responsibility for overseeing the insolvency of a big international bank.

Requiring big banks to hold enough capital and debt that could be converted into capital at the top of their corporate structures, in a hope that this capital and debt would absorb any losses the bank makes while its issues are resolved and the bank is made safe again.

They also request that banks continue with critical services, insulate foreign operations, sack reprehensible management and reduce parts of the bank that caused the problems in the first place.

What outcome is it hoped these key points will result in should there be another banking crisis?

That, for example, the Bank of England would not have to call on the Treasury  to put as much money into the Royal Bank of Scotland or an HBOS that was facing collapse, as happened in the most recent banking crisis, as the bank’s creditors would have to become shareholders.

The idea is that this would limit the cost to the tax payer and wider economy if another banking crisis should arise.

What banks in particular is this action plan aimed at?

Banks such as the UK's Royal Bank of Scotland and Barclays and Citigroup and JP Morgan in the US.

What other consequences could occur from this action plan?

According to the BBC’s business editor this could result in: “the costs for banks of raising money would rise: as you will have deduced, the risks of investing in and lending to banks increases in proportion to the perceived reduction in the implicit insurance against failure they receive from the state.”

He adds that banks will: “have to make bigger returns to generate a profit. And, everything else being equal, that means they would feel obliged to charge their customers rather more for loans and for keeping money safe."

A banker in London. Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

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Commons confidential: Vive May's revolution

It's a risky time to be an old Etonian in the Tory party. . . 

The blond insulter-in-chief, Boris Johnson, survives as Theresa May’s pet Old Etonian but the purge of the Notting Hell set has left Tory sons of privilege suddenly hiding their poshness. The trustafundian Zac Goldsmith was expelled from Eton at the age of 16 after marijuana was found in his room, unlike David Cameron, who survived a cannabis bust at the school. The disgrace left Richmond MP Goldsmith shunned by his alma mater. My snout whispered that he is telling colleagues that Eton is now asking if he would like to be listed as a distinguished old boy. With the Tory party under new, middle-class management, he informed MPs that it was wise to decline.

Smart operator, David Davis. The broken-nosed Action Man is a keen student of geopolitics. While the unlikely Foreign Secretary Johnson is on his world apology tour, the Brexit Secretary has based himself in 9 Downing Street, where the whips used to congregate until Tony Blair annexed the space. The proximity to power gives Davis the ear of May, and the SAS reservist stresses menacingly to visitors that he won’t accept Johnson’s Foreign Office tanks on his Brexit lawn. King Charles Street never felt so far from Downing Street.

No prisoners are taken by either side in Labour’s civil war. The Tories are equally vicious, if sneakier, preferring to attack each other in private rather than in public. No reshuffle appointment caused greater upset than that of the Humberside grumbler Andrew Percy as Northern Powerhouse minister. He was a teacher, and the seething overlooked disdainfully refer to his role as the Northern Schoolhouse job.

Philip Hammond has the air of an undertaker and an unenviable reputation as the dullest of Tory speakers. During a life-sapping address for a fundraiser at Rutland Golf Club, the rebellious Leicestershire lip Andrew Bridgen was overheard saying in sotto voce: “His speech is drier than the bloody chicken.” The mad axeman Hammond’s economics are also frighteningly dry.

The Corbynista revolution has reached communist China, where an informant reports that the Hong Kong branch of the Labour Party is now in the hands of Britain’s red leader. Of all the groups backing Jezza, Bankers 4 Corbyn is surely the most incongruous.

Labour’s newest MP, Rosena Allin-Khan of Tooting, arrived in a Westminster at its back-stabbing height. Leaving a particularly poisonous gathering of the parliamentary party, the concerned deputy leader, Tom Watson, inquired paternalistically if she was OK. “I’m loving it,” the doctor shot back with a smile. Years of rowdy Friday nights in A&E are obviously good training for politics.

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue