Aimee Donnellan Published: 14 June 2015
SIR JOHN VICKERS, author of the plan to split British retail and investment banks, has rejected claims that the reform could be watered down.
The economist said the ring-fencing regulation was a “done deal”. Devised by Vickers in 2011, it requires big institutions with investment banking and retail arms to put the latter into stand-alone companies by 2019.
The new organisations must have independent chairmen and a majority of independent directors. Bank bosses are questioning whether they should continue to own businesses they cannot control.
They are urging George Osborne to water down the regulatory requirement and alter the bank levy, the annual tax on their global earnings that raised £2.2bn last year.
Senior bankers and officials are scrambling to find common ground. The government is desperate to prevent the departure from Britain of HSBC, which would slash receipts from the bank levy and diminish the status of the City, but it cannot risk being seen to have backtracked on the ring fence.
HSBC’s main gripe is with the bank levy. However, it is one of several lenders that argue that the Vickers commission reforms have been made redundant by a host of other regulatory changes.
Vickers said it would be impossible to alter the ring fence at such a late stage. “Despite some of the push back from banks, the case for ring-fencing retail banking is just as strong today as four years ago, if anything more so,” he said in an interview with The Sunday Times.
City sources argue that now the economy is recovering and banks have beefed up their capital buffers to withstand another crisis, regulation could be relaxed.
Vickers, however, said the government would find it hard to convince the public that restrictions should be eased, given the impact of the financial crisis.
RBS and Lloyds, which received multibillion-pound bailouts, are still in state hands. Osborne said last week that RBS would be sold soon at a loss.“Banks are still on the way to getting where they should be,” said Vickers. “Capital requirements on a global level are still on the low side but we are definitely in a better place.”