BOURNEMOUTH, England, Feb. 4 (UPI) -- British Chancellor of the Exchequer George Osborne said a new law would allow finance regulators to force banks to divide retail and investment banking.
The New York Times reported Monday Osborne criticized the bank bailouts in a speech in Bournemouth, a coastal city in the south of England.
"Irresponsible behavior was rewarded, failure was bailed out, and the innocent -- people who have nothing whatsoever to do with the banks -- suffered," Osborne said.
Britain has bailed out several of the nation's largest banks and watched others face up to major scandals for money laundering and manipulation of benchmark lending rates.
"No more rewards for failure. No more too big to fail. No more taxpayers forking out for the mistakes of others," Osborne said in his speech.
British bank Barclays has already paid $450 million to British and U.S. regulators for attempting to manipulate the Libor or London inter-bank offered rate, an average of interest rates banks charge each other for loans.
The Royal Bank of Scotland, 82 percent owned by the British government, is expected to be the next bank to settle charges of Libor manipulation and the fine is expected to be $650 million.
The series of scandals has fueled the political reaction to the banks' role in the financial crisis and the new measures submitted to Parliament Monday anticipate the possibility that banks will try to dodge efforts to reduce risks by separating depositor funds from capital used for risky speculation, the Times reported.
Osborne said banks will have to appoint an executive to oversee the separation of retail and investment operations.
Bankers, however, complained that the measures will make it harder for banks to raise capital, which in turn will make it harder for them to make loans.
"This will create uncertainty for investors, making it more difficult for banks to raise capital, which will ultimately mean that banks will have less money to lend to businesses," said Anthony Browne, chief executive officer of the British Bankers' Association in a statement.