John Denham: Govt must address wider issue of bank lending

John Denham, Labour's shadow business secretary, welcomes Independent Commission on Banking report but calls for the government to address lending issues:

"We welcome the publication of the Vickers report today, and its recommendations to ring fence bank retail and investment arms to provide more security in the banking sector.

"These are radical reforms and are a step in the right direction in addressing the problem of bank failure. But the extra money these reforms will cost the banks should not be passed on to the consumer or small business through increased lending rates. We need to see strong competition in the banking sector to reduce this risk and to improve services for small businesses. If it is clear that the Vickers recommendations on competition have not been successfully implemented, there should be a competition commission referral in 2013, not 2015 as has been suggested.

"And it doesn't address the wider issue facing the UK economy today – bank lending to small and medium sized enterprises. The Tory-led government needs to use its influence to encourage banks to change their culture so it is more focused on getting lending to SMEs. There are a growing number of voices that are saying we need to think more creatively, ensuring the banking system has a greater understanding of the needs and potential of key sectors of our economy. If the Vickers reforms are not successful in supporting the real economy, we will need to look at radical options to ensure they provide the support businesses need. The Tory-led government needs to address these wider questions if we are to ensure a banking system that is fit for purpose in a modern economy."