The Independent Commission on Banking, chaired by Sir John Vickers, has today released its final report. Commenting, Mark Jenkinson, Capco Partner, UK Banking Team, said:
“Banks’ customers will likely see a change in the services and products they receive if a ring-fence is implemented. They may find it even more difficult to find competitive rates on savings accounts, given that banks will no longer be able to invest savings through their investment arms.
“Consumers may even find it more difficult to find a mortgage, as savings rates and volumes are not attractive enough to bring in the level of funding required for high mortgage volumes. We are also likely to see a more limited range of products and services across the retail banks.
“We have to remember that only universal banks will face the challenge of implementing a retail ring-fence. The silver lining for the consumer is the changes may level the playing field for new start-ups, making it easier for them to compete with the major players.
“There appears to be much political debate still to be finalised on the proposed timeline for putting in place the suggested reforms indicated within the Vickers report. Whilst the coalition appears to be at loggerheads around the timeline, pressure from the Treasury and Department of Business, Innovation and Skills may align the Vickers report recommendations to broader on-going regulatory change (Basel III) and into the Financial Services Bill, which is currently in draft. The ability to agree on a timeline across both the political and regulatory regimes seems to be the largest stumbling block, rather than the report itself. Any short term implementation option could force the Banks to relook at their lending quotas for the coming two years, with small businesses most likely to be impacted in the short-term.”