UK chancellor 'backs banking review'

7 March 2011

British chancellor George Osborne remains confident that an independent review into the country's banking sector is on course to deliver proportionate and fair recommendation for its future, it has been claimed.

The Financial Times cites an anonymous insider close to the Conservative finance minister as stating that the Independent Commission on Banking (ICB) is moving "in the right direction" on financial industry reform.

"We set up the banking commission and made sure it was staffed by serious and credible people" the source told the newspaper.

The report asserted that there has been considerable anger among leading banks in the wake of Bank of England governor Mervyn King's recent comments to the Daily Telegraph, in which he said he was "surprised" at the relatively muted anger towards financial firms.

Of particular concern to the sector is speculation that the ICB could opt to split up retail and investment banking operations, which would have a significant impact on the operations of some of the major names in banking.

HSBC chairman Douglas Flint was among those who raised the alarm over the possible cost implications of being based in London, although the firm has since sought to play down speculation it could relocate to Asia.

However the Treasury aide added that banks were indulging in "wishful thinking" if they thought the much-maligned Project Merlin agreement would deter the ICB from putting forward a more radical programme of reform.

Last week the Evening Standard reported that all of the ICB's membership - including chairman and former Barclays chief Sir John Vickers - had threatened to resign from the panel in protest at political interference.

The media outlet also implied that Britain's biggest banks had entered the Project Merlin negotiations in the hope that Sir John would lift the threat of major restructuring, but had failed to reach a satisfactory agreement.

By Tony Aynsley

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