UK bank watchdog demands massive reforms
Published 12/09/2011 | 09:13
BRITAIN’S banks should ring-fence their high street and investment divisions as part of a far-reaching reform package which should be put in place by 2019, a UK Government-appointed commission said today.
The protective firewall would be designed to "make it easier and less costly to resolve banks that get into trouble" and without taxpayers' help, Britain’s Independent Commission on Banking (ICB) said.
Elsewhere in its highly-anticipated report, the ICB said the Government should ensure Lloyds Banking Group's planned sale of 632 branches leads to the emergence of a "strong challenger bank" - but fell short of recommending that more branches should be sold.
Sir John Vickers and his fellow ICB members said the proposals - which will cost UK banks around £4 billion to £7 billion a year to put in place - will "put the UK banking system of 2019 on an altogether different basis from that 2007".
The 363-page report, which was published an hour ahead of schedule after being leaked, was described by the Treasury as "impressive" and an important step towards a new banking system.
UK Chancellor George Osborne - who wields the power to act upon or ignore the ICB's recommendations - will make a statement to Parliament this afternoon.
Economists and business leaders have warned that the changes could impact on the UK's growth as the banks are likely to increase the cost of lending to offset implementing the reforms and some may consider leaving the UK.
The British Bankers' Association (BBA), representing the country's banks, warned that careful consideration must be given to the reforms and their potential impact on the wider recovery.
The BBA said: "Any further reform measures adopted by the UK authorities need to be carefully analysed and compared with those agreed internationally.
"It is vital that the full impact any further reforms will have on the economy, the recovery and banks' ability to support their customers in the UK is understood."