Landmark reforms to the British banking industry, outlined in the Vickers report produced by the Independent Commission on Banking (ICB), will go ahead despite the fact they are unpopular among the majority of financiers, George Osborne, the UK Chancellor, has confirmed. Some exemptions are going to apply, however, principally around bank leveraging with a reduction to approximately 30% in the mutliples, less than was originally envisaged.
In a speech delivered at the Mansion House in the City of London mid-week, the UK chancellor still, however, insisted the government will not bow to pressure from the City and will press ahead with the vast majority of the proposals put forward in the ICB's report. As it is Sir John Vickers' report FROM LAST YEAR already shyed away from introducing a transatlantic version of the old US Glass Steagall Act, which fully separated investment and retail banking operations after the 1929 crash, in favour of a mere ringfence.
The Vickers report instead recommended that the high street operations of major UK lenders should be ring-fenced from their investment banking arms in order to protect retail customers' money, with cross-subsidaries banned.
Osborne stated at the Mansion House that the Conservative-Liberal Democrat alliance will follow these recommendations by "fundamentally reforming the structure of our banking sector" in order to make sure taxpayers do not have to foot the bill should things go wrong.
"We will be able to bail in creditors when a bank fails rather than turning to the public purse," he noted.
The UK Chancellor has also outlined plans to provide further liquidity support to UK banks in the face of the on-going eurozone crisis, with £100bn of Long Term Refinancing expected to be made available for UK banks to draw on, in addition to the Quantitive Easing (QE) support that banks have already been getting.
By Asim Shah