UK bank ring-fencing is the best option, Vickers says
Chairman of the Independent Commission on banking sets out his stall to MPs
By CFOWorld.co.uk staff | CFO UK | Published 17:26, 12 November 12
A break-up of retail and investment operations of UK banks should on the table only if ring-fencing of the former did not bring about a change in culture across the sector, according to Sir John Vickers, chairman of the Independent Commission on Banking.
The Commission was set-up by the Coalition government to review the bank sector following the financial crisis. It recommended that a UK bank's retail business should be ring-fenced from its investment banking arm by 2019.
Appearing before the Parliamentary Commission on Banking Standards, Sir John said that he had not hardened his view, by recommending a total separation of retail and investment banks rather than ring-fencing of banks, in wake of the Libor rate scandal and other controversies.
"Standards have been lower than would have been expected. But I do not see these events as shifting the balance of the argument against what we proposed, towards total separation. With the legal and other safeguards it will work, including on the cultural aspect," he told MPs.
He added that the plan – currently being mulled by the government – would require "firm and effective" regulation. Sir John also said it was important that the proposals received cross-party support.
"If the industry turned out to be unreformable...then it's possible that total separation would turn out in due course to be the better step to take," he concluded.
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