Osborne speech ends "light touch" regime George Osborne speaks in Bournemouth on Monday George Osborne comprehensively jettisoned the City tradition of self-regulation on Monday with announcements of sweeping reforms that will further restrict the banking industry's ability to chart its own fate. Speaking at JPMorgan's back office campus in Bournemouth, the chancellor said he wanted to channel "the anger" people feel towards the financial services sector to create a new framework for trust to be restored. The government would take control of the UK payments system - the "plumbing" that moves money around - away from the Payments Council, a bank-led committee, Mr Osborne announced. He also said stiff sanctions would be imposed on any bank that tried to circumvent the safety rules aimed at ringfencing retail and corporate services from riskier activities. The crackdown shows how the scandal over the rigging of the London interbank offered rate and mis-selling of products have stripped the banks of any remaining trust they enjoyed among politicians at Westminster. The Treasury rejected formal regulation of the payments system as recently as last summer, and the chancellor had resisted calls to leave in place a threat that the Treasury could break up banks that failed to respect the new ringfence arrangements. But the political winds have shifted. Barclays and UBS have paid £1bn in penalties for manipulating the bank-run Libor rate, and the Royal Bank of Scotland is on the verge of joining them. The big UK banks have also had to set aside more than £12bn to compensate millions of customers for mis-sold payment protection insurance and review 40,000 files on small businesses for possible mis-selling of interest rate hedges. Mr Osborne reiterated RBS would be forced to fund some of its expected fine of up to £500m over Libor from bonuses. He also underlined his determination to open the UK's retail banking sector beyond the domination of the big four lenders. The government has passed legislation to regulate Libor and plans to hand payments regulation to either the new Financial Conduct Authority or possibly Ofcom. "The system isn't working for customers, so we will change it," Mr Osborne said. There are no incentives on the big banks to deliver new and better services for users. No other major economy is considering moving away from the universal model of banking because it undermines banks" ability to provide all the services businesses need British Bankers" Association Adrian Kamellard, chief executive of the Payments Council, which has run the system since 2007, pledged to work with the Treasury for "a payments strategy that meets the needs of customers, the economy as a whole and satisfies any new regulatory requirements." Consumer groups praised the decisions. Richard Lloyd, executive director of Which?, said this was "the big change that people want." Mr Osborne has faced growing pressure from senior parliamentarians on a cross-party banking commission, which demanded the "electrification" of the ringfence. Justin Welby, the new Archbishop of Canterbury, a former oil executive and member of the commission, praised the decision to reinforce the ringfence as "wise and imaginative," arguing that it would make Britain's banks the most "flexible and effective" in the world. But the British Bankers" Association said the decision would damage London's attractiveness as a global centre. "No other major economy is considering moving away from the universal model of banking because it undermines banks" ability to provide all the services businesses need," the lobby group said.