Via the BBC:
UK banks’ retail operations should be “ring-fenced” from their investment banking arms, the Independent Commission on Banking has recommended.
However, in its interim report the commission stopped short of recommending the two should operate as separate entities.
It said more competition was needed in retail banking, including the sell-off of more Lloyds branches.
The commission’s final recommendations will be published in September.
Robert Peston adds,
The big banks will claim that putting their retail banks into subsidiaries would impose significant extra costs on them – because it would force them to raise and retain more capital (which is expensive), and it would increase what they pay to borrow. Their fear is that these incremental costs would put them at a disadvantage compared with their international competitors.
However the ICB says that the banks have exaggerated the size of this new financial burden. It calculates that the extra costs would be a good deal less than the £12bn to £15bn a year estimated by the consultants Oliver Wyman in a report prepared for the banks.
Perhaps more importantly, the commission is convinced that the social benefits of the reform – in respect of reducing the likelihood of destabilising financial shocks that increase unemployment and cut growth – would significantly outweigh the costs.
Lib Dem peer Matthew Oakeshott, who has been extremely vocal about regulating banks further, has welcomed the proposals:
Lord Oakeshott has just given his seal of approval to the work done by the Vickers Commission on banking, declaring it an “excellent piece of work“.
The fact that Lord Oakeshott approves of the suggested remedies for making the banks safer and more competitive is significant: it means that the Lib Dems in the coalition are unlikely to try to toughen up the proposals in the coming months.
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4 Comments
The one key point that I found interesting is this one:
* The costs of the package could fall on the wider economy but this is “outweighed” by the benefits of reducing the likelihood and impact of future crises.
I suppose the ” wider economy ” means that instead of fleecing you as a taxpayer, they will fleece you by increased bank account charges as a kind of insurance policy for their (banks) future mistakes.
This madness goes on and on. and I have to ask the question in all seriousness. Is there ANYONE in government with a moral compass ??
I’m deeply sceptical about these proposals. Too big to fail is too big, and it is up to the Lib Dems to put some steel into these proposals, because there is no chance either Tory or Labour will do.
http://livingonwords.blogspot.com/2011/04/banks-report-has-making-of-another.html
All seems very cosy. This is a world where everyone knows everyone else. They went to school together, they went to university together. They were probably work colleagues at some time, or at least were familiar with each other through banking business.
How can any of this be seen to be objective or fair. Would any committee composed of members of passengers on the ‘Clapham Omnibus’ have come up with the same report.
Reports say the banks and vested interests will now ‘lobby’ to get more of what they want. Why are they allowed to ‘lobby’ to protect their interests? Who is going to ‘lobby’ for you and me who has no banking connections?
Am I allowed to have lunch with the committee to express my thoughts and fears about the future of the banks? If not why are the bankers given that opportunity. Oh I forgot, they are all ‘chums’ so thats alright.
Perhaps we need our ‘peoples revolution’ more than some of the Middle East and African countries.
From Robert Peston, “The big banks will claim that putting their retail banks into subsidiaries would impose significant extra costs on them…
Of course they would say that but note this. It’s about extra costs for “them”, extra costs for the wider society are not their concern. In other words, they want to continue externalising their costs onto society which bears the costs through a combination of lower growth than we would get absent an extractive financial sector and through higher taxes to bail out the busts we must expect.
Already last week Bob Diamond, boss of Barclays, was talking of the need to go after higher risks to get the higher rewards that go with those higher risks. The competitive logic of this is that other banks must respond until it blows up again. It’s Russian roulette with taxpayers’ money but that’s okay for the likes of Diamond – they will be long gone with their bonuses and pensions safely stashind in offshore havens.
The IBC report is a start but only a start. The devil will be in the detail and it’s a pretty safe bet that Osborne & Co will be doing their level best to ensure that the final version has only cardboard teeth – intended only to look good when seen from a distance by a credulous public but with no bite whatsoever.