The commission was setup after the Libor rate rigging scandal with the intention of finding new ways to control, monitor and regulate the banking sector.
The government rejected a proposal from the commission which would force banks to completely separate their business between retail and investments.
The idea behind the proposal was to safeguard banking customers from risky investments on the stock market which could cause a complete collapse.
Andrew Tyrie who is head of the commission said,
“The Government rejected a number of important recommendations,”
“The Commission has examined these again, alongside the Government’s explanations for rejecting them.
“We have concluded that the Government’s arguments are insubstantial.”
One proposal which the government did agree to introduce was the power for regulators to punish those banks which didn’t implement the reforms.
Shadow chancellor Ed Balls said,
“This latest report from the Parliamentary Commission on Banking Standards makes for disappointing reading. It confirms George Osborne is continuing to duck the radical banking reform we need and which the cross-party commission has demanded.”
The report from the commission concluded,
“There is still a long way to go if the legislation now before the House of Commons is to provide legislative impetus for a transformation of the UK banking system.
“The government’s proposal for the periodic review to be conducted by the regulator is wholly inadequate,”
“Such a review conducted by the regulator would be little different in character from the regulator’s annual report and could amount to no more than a case of the regulator marking its own examination paper.”
The report comes a week before Chancellor George Osborne announces the budget for the next year and the recommendations should feature in it.
The next year is expected to see a significant shake-up of the financial sector with the FSA being replaced and the Bank of England governor changing.
It remains to be seen whether or not any proposals could be put forward which would actually regulate banks better than a naturally run free market would.