AS we enter 2013, the future of the banking sector in the UK has become an issue of debate. The Parliamentary Commission on Banking Standards, chaired by Andrew Tyrie, MP, has published an interim report in December calling for the ring-fencing between banks' retail and investment banking operations to be ‘electrified'.

The Treasury is reported to be hesitant to go as far as the Commission recommends anticipating that placing too burdensome a regulatory burden on the banks could hamper their ability to support the UK's economic recovery. Ring-fencing retail banking whether with the addition of electricity or not would go some way to dealing with two of the three crucial elements of bank reform: reducing the implicit subsidy from the taxpayer to the financial sector and increasing the protection of depositors, borrowers, investors and shareholders from risk. However, it would do nothing to address way to reduce the excess economic rents extracted by the sector which is the missing element of financial reform.

This is an important cross-party report which sets out real challenges for the banks, government and Parliament. After repeated scandals, from Libor fixing to mis-selling to small businesses, it is clear that we need radical reform of our banks.  As a first step, the government should extend the remit of the Tyrie Commission on Banking Standards to cover rent extraction from corporate, institutional, and wholesale users of financial services.