Tories back Obama's bank reform plans

Mr Osborne said the Conservatives would follow the US lead

Shadow chancellor George Osborne has told the BBC that if the Conservatives win the general election they would follow US plans to reform banks.

Under the proposals outlined by President Barack Obama, US retail banks will face curbs on their riskier activities.

Mr Osborne said he would want to see international agreement before implementing any change in the UK.

The Treasury said it would consider the US bank reform plans "very carefully".

'Welcome move'

BBC business editor Robert Peston said Mr Osborne's comments would "generate profound fear in the boardrooms of Barclays and Royal Bank of Scotland".

This is a welcome move by President Obama that accords very much with our thinking George Osborne, Shadow chancellor Should Britain follow the US lead?

Shares in both banks fell sharply on Tuesday, with Royal Bank of Scotland losing 7% - the biggest decline on the UK's main FTSE 100 share index. Barclays lost 5.9%.

Under President Obama's proposals, retail banks would be banned from using their own money in risky financial transactions.

This would prevent them from investing in hedge and private equity funds, or engaging in so-called proprietary trading - investing their own money as opposed to that of their customers.

"This is a welcome move by President Obama that accords very much with our thinking," said Mr Osborne.

"I have said consistently that we should look at separating retail banking from activities like large scale propriety trading - and that this was best done internationally."

Vince Cable, deputy leader of the Liberal Democrats called on the government to "get on with breaking up the banks".

"It is absolutely essential that Britain is not left behind by the US," he said.

"Britain is much more dependent on banks than America is and we are therefore much more vulnerable to banking crashes."

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