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12/09/2011
UK Banks To Face Major Shake-Up
A government-backed commission has suggested that UK banks should ring-fence their retail banking divisions in order to protect them from riskier investment banking arms.
The Independent Commission on Banking, led by Sir John Vickers, said it would "make it easier and less costly to resolve banks that get into trouble."
The ICB was set up last year to look at how taxpayers could be protected from future banking crises.
Their report recommends that ring-fenced banks should be the only operations granted permission by the UK regulator to provide "mandated services", which include taking deposits from and making loans to individuals and small businesses.
It says that the different arms of banks should be separate legal entities with independent boards.
Chancellor George Osborne welcomed the report. He commented: "This commission has tackled that big question that we face in Britain, which is how can we be a home to successful banks that compete around the world, but lend to British families and British businesses, but at the same time protecting us as taxpayers from the cost of them going wrong, and not ending up with a multi-billion pound bill when the bank collapses."
Another of the ICB's recommendations is that banks must have a buffer to absorb the impact of potential losses or future financial crises - of at least 10% of domestic retail assets in top-quality form, such as shares or retained earnings.
The report also suggests the government should ensure that Lloyds Banking Group's planned sale of 632 branches leads to the emergence of a "strong challenger bank."
The ICB called for these changes to be implemented by the start of 2019.
(JG/GK)
The Independent Commission on Banking, led by Sir John Vickers, said it would "make it easier and less costly to resolve banks that get into trouble."
The ICB was set up last year to look at how taxpayers could be protected from future banking crises.
Their report recommends that ring-fenced banks should be the only operations granted permission by the UK regulator to provide "mandated services", which include taking deposits from and making loans to individuals and small businesses.
It says that the different arms of banks should be separate legal entities with independent boards.
Chancellor George Osborne welcomed the report. He commented: "This commission has tackled that big question that we face in Britain, which is how can we be a home to successful banks that compete around the world, but lend to British families and British businesses, but at the same time protecting us as taxpayers from the cost of them going wrong, and not ending up with a multi-billion pound bill when the bank collapses."
Another of the ICB's recommendations is that banks must have a buffer to absorb the impact of potential losses or future financial crises - of at least 10% of domestic retail assets in top-quality form, such as shares or retained earnings.
The report also suggests the government should ensure that Lloyds Banking Group's planned sale of 632 branches leads to the emergence of a "strong challenger bank."
The ICB called for these changes to be implemented by the start of 2019.
(JG/GK)
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