Miliband Promises 'Reckoning' With Big Banks
Ed Miliband has promised to force the big five banks to give up "significant" numbers of branches to make way for "at least two" new competitors.
In a keynote speech on the economy at the University of London, Mr Miliband said the financial services industry has been "a pretty poor servant of the real economy".
He blamed a lack of competition in the sector for misselling scandals and a £56bn drop in lending to business since 2010.
The Labour leader was fleshing out his party's economic policy for the next Parliament.
But he risks being overshadowed by Chancellor George Osborne's backing of a significant rise in the national minimum wage.
Mr Miliband promised to introduce a legal maximum threshold for any bank's share of the market in personal accounts and small business lending, with powers to force the sale of branches and block mergers and acquisitions to prevent it being breached.
Under the proposals, the Competition and Markets Authority would report within six months of the May 2015 general election on the level the threshold should be set at and the timetable for the sell-off of branches, which would be completed by 2020.
He said: "We need a reckoning with our banks, not for retribution, but for reform to tackle the cost of living crisis in this country.
"Today I want to talk about the next stage of banking reform and it gets at what I think is one of the deepest problems in British banking, something that has been a problem for decades - too much power concentrated in too few hands.
"On day one of the next Labour government, we will ask the Competition and Markets Authority to report within six months on how to create at least two new sizeable and competitive banks to challenge the existing high street banks.
Mr Miliband said he Labour would adopt a principle from the US, where rules are in place to prevent any bank from growing too big.
He said: "In America, by law, they have a test so that no bank can get too big and dominate the market.
"We will follow the same principle for Britain and establish for the first time a threshold for the market share any one bank can have of personal accounts and small business lending."
Prime Minister David Cameron blamed the last Labour government for leaving the banking system a "mess".
He said: "We've been clearing up the mess made by Ed Miliband and Ed Balls and sorting out our banking system, and it's much stronger than the mess we inherited from Labour."
Treasury Minister David Gauke said around £1bn had been wiped off bank shares on Friday morning since reports of Mr Miliband's heavily-trailed speech emerged.
He told Sky News: "I'm afraid on just a practical level, Labour's plans don't really help very much. Just forcing some banks to refuse to serve some of their customers and close some of their branches doesn't constitute an economic policy."
Business Secretary Vince Cable said he agreed with Mr Miliband's desire for increased competition but said there was a danger that he was "reinventing the wheel".
He told Sky News: "We have created two new challenger banks within the last year - one out of RBS, one out of Lloyds.
"There are other new challenger banks already starting... and I'm in the process of getting the Government's business bank operating, which is supporting new kinds of lending, through the internet for example.
"There's no point in doing what Ed Miliband's doing, which is going back to the beginning."
Mr Miliband signalled Labour's irritation with Bank of England governor Mark Carney, who earlier this week said a cap on banks' market share "would not result in substantial improvement to competition".
He said: "I think it's not healthy for us to involve governors of the Bank of England in big political debates."
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