An influential parliamentary commission has just cut George Osborne's wiggle room in implementing British banking reform.
When the British chancellor asked the cross-party group to vet proposals to erect a firewall between retail and investment banking operations, he may have expected an uncontroversial rubber-stamping. In fact, he's received a needed kick to do the job properly.
The group has not gone as far as calling for a full, Glass-Steagall-style breakup of universal banks. But it has proposed a range of ways to make the fence "electrified" to prevent it being eroded or bypassed over time. In addition to having the new Prudential Regulation Authority monitor implementation, the Commission on Standards in Banking calls on the Bank of England to impose leverage ratios relating capital to total assets.
It adds up to a hard interpretation of last year's government-sponsored Vickers report on reforming Britain's banking system.
Mr. Osborne has already let Vickers get watered down on its path to the statute. Given that banks are groaning under the weight of conflicting requirements to increase lending to the economy, bolster capital and pay penance for past sins like Libor, he probably wanted to retain as much flexibility over how and when to implement ring-fencing.
His approach earned a slap from Andrew Tyrie, the commission's chair, who made little effort to disguise frustration at the limited time given to scrutinize the primary legislation and the fact that Mr. Osborne has not divulged how vital details of ring-fencing will work.
Mr. Osborne doesn't have to bear Mr. Tyrie's views in mind as the final bill is drawn up. But it makes it harder for the chancellor to have it both ways.
Mr. Osborne threw his weight behind ring-fencing even before the Vickers report, keen to depict himself as tough on the banks by demanding full implementation.
Given that ring-fencing is no panacea when it comes to making banks safe, bad ring-fencing would be a waste of time. Mr. Osborne should electrify the fence, not sit on it.