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Bank shares dip after Miliband plan
Labour leader Ed Miliband makes a speech about banking and the economy in the Senate House at the University of London.
Shares in the predominantly state-owned Royal Bank of Scotland and Lloyds have come under pressure as Ed Miliband unveiled his plans to break up Britain's big five high street lenders.
Labour acknowledged the two banks would take a short-term "hit" - but insisted reform was necessary to inject competition into a "broken" banking system and increase the flow of credit to small businesses.
However Treasury Minister David Gauke said the Labour leader's intervention was not "helpful" - amid reports that it could delay their planned return to the private sector.
Shares in RBS and Lloyds were each down around 1% on the FTSE 100 Index following Mr Miliband's keynote speech at the University of London.
"I notice that a lot has been wiped off the value of the shares of those banks this morning so I don't know how helpful that is in terms of that national interest because that's UK taxpayers who have lost out," Mr Gauke told BBC News.
"We'll see over the longer term but I think it is something like £1 billion this morning."
Earlier, shadow business secretary Chuka Umunna acknowledged that Labour's plan would affect the value of RBS and Lloyds, but said the economy would benefit in the long run.
"I'm not denying in the short term that you may see a hit on the share price of these banks - it's probably happening as we speak now. But the reason we are doing this is so that we can grow our small businesses," he told the BBC Radio 4 Today programme.
In his heavily-trailed address, Mr Miliband confirmed that a Labour government would impose a US-style cap on the market share that any one bank can have in personal accounts and small business lending.
The Competition and Markets Authority would be instructed to report within six months of a Labour election victory with proposals to create a least two new "sizeable and competitive banks" to challenge the existing high street lenders.
With just four banks controlling 85% of small business lending, Mr Miliband said the financial services sector had proved a "poor servant" of the real economy.
"We need a reckoning with our banks, not for retribution but for reform," he said.
"In this country, over decades we have seen greater and greater concentration in our banking system. I am determined that the next Labour government turns that tide.
"I want to send a message to all the small and medium sized businesses of our country: under the next Labour government, instead of you serving the banks, the banks will serve you once again."
Mr Umunna signalled Labour's irritation with Bank of England Governor Mark Carney who earlier this week told MPs that capping the banks' market share would not lead to a "substantial improvement" in competition.
"It is not healthy for us to involve governors of the Bank of England in big political debates," he said.
There was a mixed reaction from business to Labour's plans. The Federation of Small Businesses national chairman, John Allan, said more competition in the banking sector was needed but that capping market share was not the right way to do it.
"In our view, that will be achieved by encouraging further entrants into the market through regulatory reform, improving the way the market functions for example reforming the current payment system controlled by the big banks, and stimulating a vibrant non-bank market such as peer-to-peer lending," he said.
"These issues need to be addressed and reforms speeded up before drastic action such as stipulating market share caps are put in place."
The chief executive of manufacturers' organisation the EEF, Terry Scuoler, was more positive, saying that Mr Miliband had set out some "good ambitions" for what a more competitive banking system should look like.
"The best way to deliver this is to systematically reduce the barriers to new banks entering the market and encourage more churn and dynamism in the business and personal current account markets. That said, how this is achieved will need much careful consideration," he said.