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Brown pledge to 'clean up' City Brown pledge to 'clean up' City
(19 minutes later)
Gordon Brown has pledged to "clean up" the financial system following the rescue of Britain's biggest mortgage lender HBOS by Lloyds TSB.Gordon Brown has pledged to "clean up" the financial system following the rescue of Britain's biggest mortgage lender HBOS by Lloyds TSB.
The prime minister said he had taken "quick action" to "maintain the stability of the financial system".The prime minister said he had taken "quick action" to "maintain the stability of the financial system".
But he said he also had proposals to end "irresponsible behaviour" in the money markets to prevent similar problems happening in the future. But he said he also had proposals to end "irresponsible behaviour" in the money markets in the future.
The government by-passed competition laws to allow the takeover to happen. The Conservatives accused Mr Brown of trying to "disown" the financial regulation system he himself created.
The £12.2bn deal will create a mega bank that will dwarf its nearest rivals in the UK mortgage and savings market. The government by-passed competition laws to allow the £12.2bn Lloyds TSB takeover to happen, following the dramatic collapse in the share price of HBOS, amid fears it was exposed to bad debt.
It follows the dramatic collapse in the share price of HBOS, Britain's biggest mortgage lender, amid fears it was exposed to bad debt. It will create a mega bank that will dwarf its nearest rivals in the UK mortgage and savings market.
'Very bleak''Very bleak'
The takeover is unlikely to have been allowed by the Competition Commission under normal circumstances.The takeover is unlikely to have been allowed by the Competition Commission under normal circumstances.
We've got to clean up the financial system, we don't want these problems recurring in the future Gordon Brown Darling seeks job assurancesWe've got to clean up the financial system, we don't want these problems recurring in the future Gordon Brown Darling seeks job assurances
But the government says it will allow the deal as financial stability "must trump" competition fears.But the government says it will allow the deal as financial stability "must trump" competition fears.
Chancellor Alistair Darling added that without the deal the outlook was "very bleak indeed", though he denied the authorities had rushed through the deal.Chancellor Alistair Darling added that without the deal the outlook was "very bleak indeed", though he denied the authorities had rushed through the deal.
Mr Brown said the government's main priority in the short-term was to ensure the stability of the financial system.Mr Brown said the government's main priority in the short-term was to ensure the stability of the financial system.
But in the longer-term, he said there would be reforms of the financial system to prevent future future problems.But in the longer-term, he said there would be reforms of the financial system to prevent future future problems.
'Restore prosperity''Restore prosperity'
He told the BBC: "I think we've got to look at where there has been irresponsible behaviour and I've said for some time that we need reforms in the system.He told the BBC: "I think we've got to look at where there has been irresponsible behaviour and I've said for some time that we need reforms in the system.
"I believe there's now an audience that agrees with me that we should do more."I believe there's now an audience that agrees with me that we should do more.
"We've got to clean up the financial system, we don't want these problems recurring in the future."We've got to clean up the financial system, we don't want these problems recurring in the future.
"I proposed a number of things to our international colleagues because this is global action that is needed to deal with a global problem, and in our own country we'll do whatever is necessary to make sure that people have confidence both in the system and we restore the prosperity of the country.""I proposed a number of things to our international colleagues because this is global action that is needed to deal with a global problem, and in our own country we'll do whatever is necessary to make sure that people have confidence both in the system and we restore the prosperity of the country."
Banks in trouble will be forced to disclose their debts to the Financial Services Authority, the Bank of England and the Treasury under proposed new legislation.Banks in trouble will be forced to disclose their debts to the Financial Services Authority, the Bank of England and the Treasury under proposed new legislation.
Financial reformsFinancial reforms
The Banking Reform Bill, due to become law in the next Parliamentary session, will also allow the Bank of England to act more quickly to take over ailing banks.The Banking Reform Bill, due to become law in the next Parliamentary session, will also allow the Bank of England to act more quickly to take over ailing banks.
The government also backs international moves to allow central banks to intervene more heavily in the banking system.The government also backs international moves to allow central banks to intervene more heavily in the banking system.
Mr Brown has been calling for the establishment of an international early warning system to ensure future credit crunches are identified and dealt with before the effects spread.Mr Brown has been calling for the establishment of an international early warning system to ensure future credit crunches are identified and dealt with before the effects spread.
In a foreign policy speech in May, he urged America to join him in pushing for reform of the major international institutions including the International Monetary Fund and World Bank.In a foreign policy speech in May, he urged America to join him in pushing for reform of the major international institutions including the International Monetary Fund and World Bank.
But there are no signs Mr Brown will follow the lead of the US financial regulators and curb "short-selling" - the practice which allows speculators to profit from falling share prices, which critics say fuels financial instability.But there are no signs Mr Brown will follow the lead of the US financial regulators and curb "short-selling" - the practice which allows speculators to profit from falling share prices, which critics say fuels financial instability.
Some of Mr Brown's domestic plans are also likely to be opposed by the banks themselves, who fear shareholders in troubled institutions could be stripped of their rights.Some of Mr Brown's domestic plans are also likely to be opposed by the banks themselves, who fear shareholders in troubled institutions could be stripped of their rights.
The Conservatives have said they will support government legislation to reform the system - but they also want to go further and hand the regulation of the banks back to the Bank of England.The Conservatives have said they will support government legislation to reform the system - but they also want to go further and hand the regulation of the banks back to the Bank of England.
Shadow chancellor George Osborne said the Conservatives would also consider rules to smooth out the "credit cycle" to prevent banks lending too much in good economic times and not enough when things turn bad. 'Lavish bonuses'
The Tories would also consider rules to smooth out the "credit cycle" to prevent banks lending too much in good economic times and not enough when things turn bad.
Shadow Chancellor George Osborne said: "We all want to see reforms that return stability to financial services and prevent another bubble.
"Conservatives have proposed changes to capital rules, for banks to ensure responsible lending, new protection for depositors from financial collapse and tough new powers for the Bank of England to intervene in financial markets.
"Gordon Brown now says he wants to "clean up" the City. He seems to forget that he is the man who in ten years as Chancellor created the current system of regulation. For ten years he boasted about his achievements. Today he is trying to disown them."
Vince Cable, the Lib Dem Treasury spokesman, has been pressing for banking reform and tougher controls on lending for years.Vince Cable, the Lib Dem Treasury spokesman, has been pressing for banking reform and tougher controls on lending for years.
He has urged the end of "lavish" City bonuses and predicted the era of "freewheeling" financial markets was coming to an end.He has urged the end of "lavish" City bonuses and predicted the era of "freewheeling" financial markets was coming to an end.