Ring-fencing 'may disadvantage UK banks'

12 October 2011

Banks in the UK may be placed at a considerable disadvantage should their retail operations be ring-fenced from their investment arms.

This is the view of some of the bosses at the largest lenders in the UK, who have questioned the benefits of implementing such an arrangement.

Despite acknowledging this approach would not be a make-or-break issue, the industry figures claimed the higher costs involved could hurt them financially.

The proposals - which are designed to prevent another financial crisis - have been made by the Independent Commission on Banking (ICB) and included the recommendation that institutes hold more money in reserve to counter losses in the future.

Lloyds Banking Group chairman Sir Win Bischoff claimed the move would not be a positive one for London, while chief executive of Royal Bank of Scotland (RBS) Stephen Hester suggested ring-fencing could harm competitiveness.

Douglas Flint, chairman of HSBC - which has around 100 million customers worldwide - observed: "Ring-fencing won't impact the availability of funds [to lend to businesses], but it will impact the cost."

By Gary Cooper

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