On 17 January 2014, the Labour party, the main UK opposition to the coalition government, promised that it would create two large new banks to challenge the existing order in the UK banking market if elected in 2015.
The two new retail banks would be formed by forced divestitures of some branches of the existing banks such as Lloyds, RBS and HSBC. The Labour party believe the break up of the existing structure and new entrants would stimulate competition for consumer and small businesses. They would ask the newly formed Competition and Markets Authority (the soon to be active UK super-regulator), to devise a plan to enact their requests.
The plans were criticised by the Mark Carney, Governor of the Bank of England, the UK’s central bank who believed they would not necessarily stimulate competition and UK business lobbying groups who believe competition matters should be left to independent competition regulators rather than political parties seeking votes.
Shares in large UK banks took slight downturns on the news but not as badly as could have been suspected. It is reported that many in finance believe such reforms would be very difficult and would take years to instigate. New legislation to set a cap on the size of the banks and force the market reform would be necessary, not to mention the uncertainty of the 2015 UK election meaning a Labour victory is in no way certain.