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London.
Plans for a major shake-up of Britain’s banks will be revealed on Monday when a
government-appointed commission publishes final recommendations aimed at
avoiding further state bailouts of lenders.
However
following intense lobbying by major British banks such as HSBC and Barclays,
reports suggest that any reforms may not occur until after the country’s next
general election in 2015.
The
Independent Commission on Banking is expected to confirm its initial proposals
published in April that called for a “ring-fencing” of lenders’ retail businesses,
thus avoiding banks being sunk by investment division losses.
It is also
likely to repeat calls for banks to set aside more capital to prevent future
state bailouts and could again recommend that state-rescued Lloyds Banking
Group sells more assets to boost competition.
However it
is not expected to call for the banks to be broken up, as some argue is
necessary for real reform.
The ICB’s
creation in June 2010 followed fierce criticism over so-called casino banking —
a term used to describe the high risks taken by investment bankers denounced
for their role in the global financial crisis of 2008.
Finance
minister George Osborne set up the commission which is chaired by John Vickers,
a former chief economist at the Bank of England.
“The Vickers
report as we all know is going to recommend the retail and investment banking
divisions of UK banks are separated,” said Simon Denham, head of Capital
Spreads trading group.
“In theory
it all sounds like a nice idea, but the timing is bad particularly when banks
have [already] been forced to increase the amount of capital they hold, whilst
being continually badgered to increase the amount of lending they do and at the
same time cope with a raft of new regulations.”
The BBC has
reported that while Vickers is expected to recommend that the government
legislates almost immediately over ring-fencing, he will advise that such
firewalls be phased in over a number of years.
Other media
reports suggest any change may not occur for at least four years.
There are
fears that swift implementation of ring-fencing amid renewed weakness in the
global economy could pressure Britain’s biggest banks to relocate abroad. HSBC
and Barclays are both rumored to be considering moving their headquarters away
from Britain.
The ICB
said in April that Britain’s banks should raise core capital ratios to “at
least” 10 percent, significantly more than the 7.0 percent required by 2018
under new international “Basel III” rules that were agreed last year.
It also
called for improved measures to help consumers switch current accounts.
Also set to
be affected by the plans will be Royal Bank of Scotland, which like LBG
required a massive bailout from the British state following the financial
crisis. The two lenders have meanwhile cut tens of thousands of jobs in recent
years.
Britain’s
biggest union Unite last week said that 150,000 jobs had been lost across the
country’s financial services industry since the near-collapse of another
British bank, Northern Rock, in late 2007.
“However,
little has changed to improve the regulatory regime and prevent a future
crisis,” Unite said in a statement.
“Despite
these astronomical staff cuts, the sector continues to resist the calls for
regulatory reform to ensure that our economy is never brought to its knees in
the same way.
“Ahead of
the report from the Independent Banking Commission on Monday the scale of jobs
cuts must not be ignored,” the union added.
Agence France-Presse
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