Milibands Bank break up plan impossible

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10732116/Ed-Milibands-bank-break-up-plan-impossible.html


10:00PM GMT 29 Mar 2014Comments20 Comments
Labour's plans for a swift break-up of Britain’s banking industry would be unworkable, the head of the UK’s new competition watchdog has warned.
Alex Chisholm, the chief executive of the Competition and Markets Authority, said any investigation leading to the potential forced sale of bank branches would take “18 months at least” and require “a ton of work”, while any ensuing disposals could take several years.
He was reacting to Ed Miliband’s pledge in January that, should the Labour leader be elected next May, he would introduce a legal maximum threshold for any bank’s share of the market in personal accounts and small business lending — and give the CMA six months to establish the limit. Any bank whose share exceeded the threshold would be forced to sell branches, in the process creating two new “challenger banks”, Mr Miliband said.
READ: Telegraph's interview with Alex Chisholm
Mr Chisholm studiously avoided saying whether Mr Miliband’s plans betrayed a poor understanding of either competition law or the banking industry but spelt out why a six-month review and subsequent break-up would be impossible.
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The CMA formally comes into being on Tuesday as Britain’s new competition regulator, incorporating the Competition Commission and some of the consumer work of the Office of Fair Trading.
Mr Chisholm said the new body, in shadow form, alongside the OFT, had already been “looking at SME banking for about six months” and combining that “with a short review of personal accounts is going to take us a further three months”.
Should that lead to an investigation, he said: “I would expect it to take us 18 months at least. What is important in all of our work is we look very hard and very carefully at the evidence there is on how the market is actually working. We take a lot of care to work out, is there a way we can get it working any better and we don’t want to have any regret about that.”
He stressed that any proposed remedies would have to stand up to legal challenge, adding: “We need to test those proposed remedies and feel very confident that what we are doing is proportionate and justified.”
He pointed out that an investigation into the aggregates industry, which is a “much smaller market than banking”, had involved reviewing “50,000 documents”. “Banking, which is a data-rich environment, is one where the amount of data that would be needed to be looked at to reach a strong view about the way that competition is actually working would be enormous,” he said.
He added that the banking sector was also a collection of inter-related markets, which added to the complexity.
“Although we often talk a little loosely about banking, in reality retail banking is a series of different markets — current accounts, credit cards, foreign exchange, mortgages, invoice discounting for small businesses, loans against capital machinery. All of these different segments have different dynamics,” he said.
Mr Chisholm also stressed that an inquiry into the “Big Six” energy utilities was appropriate. “I don’t think it’s an issue that’s been created by politicians. It’s an issue that’s out there,” he said.
A Labour spokesman said: “We will reform competition in the banking market, with a legal limit to prevent banks getting too big and at least two new challenger banks, as we have set out. Small businesses have waited too long for a more competitive banking market which provides them with the funding they need.
“The big four banks control 85pc of lending to small and medium-sized businesses, and the Independent Commission on Banking highlighted the lack of competition.”.

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This is one decision by the Labour Party I approve of, considering the Government Expense of propping up RBS, why is it unworkable??? Isn't this taking over from the FSA which failed miserably to investigate banks and the USA proved how efficiient they were . they even warned Bernard King about RBS but he took no notice.