Shadow Chancellor Ed Balls has proposed "three tests" that the banking commission and Chancellor George Osborne "need to pass" in order to protect Britain from another financial crisis.
In the blog post, published last night, Balls concedes that Labour should have seen the crash coming and been tougher in regulating the banks.
Every government in the world got that wrong – and that’s why a fortnight ago I said sorry for the part I and the last Labour government played in that. When the City and the Tories called for lighter regulation, we should have ignored them and been tougher still.
The issue for the future, he says, is to make sure that this does not happen again.
Balls sets out three tests that the Chancellor and the independent banking commission must pass in order to meet that challenge - on stability and consumer protection, international agreement to protect jobs in Britain and supporting long-term investment.
1. Structural reforms to protect customers and avoid bank bailouts.
That means tough accountability and transparency and clear, workable and robust firewalls. The devil will be in the detail of the commission’s final proposals but we must get this right.
And we need tough action to promote greater competition too, including making it easier for customers to move their main bank account. As few as three per cent of customers switch accounts each year, partly because it is so complicated. So I hope the commission will look at ways of making current accounts portable like mobile phone numbers in order to increase switching and so encourage competition.
2. International agreement on reforms to protect jobs dependent on financial services here in Britain.
Real banking reform cannot be accomplished alone in the UK. If George Osborne fails to secure international consensus and we see those jobs move abroad, whilst we nevertheless fail to tackle the international weaknesses that caused the crisis, he will be letting Britain down.
3. A banking system that supports investment to drive growth and jobs.
As Ed Miliband said at the British Chambers of Commerce this week we need to move from call centre banking to relationship banking and we need to ensure there is proper funding in place for businesses at every stage of their growth – from bank loans, to export finance, to equity. This was not an issue within the commission’s remit, but it is one George Osborne needs to urgently address if we are to get sustainable long term growth.
It's good to see that Balls is finally putting flesh on the bones of his approach to banking reform, but is he going far enough?