Why Labour's bank break-up has not hurt shares

City workers walking past buildings in shadow

Investors seem to have taken in their stride Ed Miliband's pledge to break up the big banks and impose a ceiling on their respective shares of the market.

The price of Barclays and Lloyds shares dropped less than 1% and those of Royal Bank of Scotland by a bit more than 2%.

Which is not desperately significant on a day when the stock market as a whole was largely flat.

So why the lack of shock and awe?


Well investors apparently doubt Labour's resolve to do what is necessary to force the disposal of hundreds of branches - and also think the reforms would take many years.

For example, the soon-to-launch Competition and Markets Authority could not, as currently constituted, simply be instructed to devise a way of creating two new challenger banks from the existing banks in just six months.

Nor could it be told to set a new legal maximum for the size of banks in the same time frame.

So Ed Miliband would have to introduce new competition legislation on taking office - which Labour tells me it would do, but investors believe could not be passed quickly or easily.

And bankers also believe that even if the CMA imposed a new cap on the size of banks, that could be challenged under EU law.

Or to put it another way, investors seem to believe that Mr Miliband is posturing to win votes, and would conveniently find a way to abandon the break-up plan after the election.

Which, according to Mr Miliband's close colleagues, shows that the City remains a bit short-termist and perhaps naive.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

Will this be history's dullest budget?

The LibDems are intent on preventing George Osborne announcing any serious tax or spending reforms in the budget.

Read full article

More on This Story

More from Robert


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 138.

    Labour should police the city, not be a part of it. I do understand we the taxpayer have to fork out up to £85,000 to each depositor if a bank goes belly up. (though I do wonder what insurance companies are now for ?) so we have a vested interest. But let capitalism hang it's self and clobber it for as much tax for the UK coffers while they are doing it.

  • rate this

    Comment number 137.

    135. Graucho Meldrew

    An apparently different bank


    Milibrands shuffle on the High St is meaningless unless totally different players come forward. I really dont see that happening from trad outfits

    In any case Milibrands idea seems very yesterday with the relentless march of IT being adopted by banks. More & more will shift to internet and mobiles

  • rate this

    Comment number 136.

    Time to give the bankers a bread.
    Ultimately it's the politicians who take responsibility.
    Who devised the "light touch" regulatory framework?
    Who were accessible to bankers but not to the regulators?
    Who ennobled Fred the Shred Goodwin?
    The answer Blair, Brown and Balls.
    Not that the Conservatives would have done anything much differently if they had been in power.

  • rate this

    Comment number 135.

    @134 Big companies can raise money on the stock and bond markets. It's small to medium sized ones that need banks, so two smaller banks can do the job of one big one and give the same tax yield. The other example of a trading nation that allowed its banks to get oversized and run riot is Japan. They are still paying the price.

  • rate this

    Comment number 134.

    131.Graucho Meldrew
    As good judgement appears to be rare, banks have to be smaller for damage limitation on failure.
    What about the effects on the rest of business & industry? And where will you make up the tax difference? Tax all food, not just the 'sugar' heavy? Tax salt? Tax water? Make VAT apply at full rate to everything?


Comments 5 of 138


Features & Analysis

  • Cartoon of women chatting on the metroChat wagon

    The interesting things you hear in a women-only carriage

  • Replica of a cargo boxSpecial delivery

    The man who posted himself to the other side of the world

  • Music scoreFinal score Watch

    Goodbye to NYC's last classical sheet music shop

  • Former Secretary of State Hillary Rodham Clinton checks her Blackberry from a desk inside a C-17 military plane upon her departure from Malta, in the Mediterranean Sea, bound for Tripoli, Libya'Emailgate'

    Hillary gets a taste of scrutiny that lies ahead

From BBC Capital


  • A cyborg cockroachClick Watch

    The cyborg cockroach - why has a computer been attached to this insect’s nervous system?

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.