Big Banking
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- UK and EU in 'Rock sale deadline'
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| Vince Cable says the government will now accept the Vickers report in full. |
The
government will accept the Vickers report into banking "in full",
Business Secretary Vince Cable has told the BBC.
The Vickers
report recommended separating a bank's retail business from its investment
business.
Mr Cable
told the Andrew Marr show: "We are going to proceed with the separation of
the banks."
On Monday,
the Chancellor George Osborne gives a statement to parliament, after the
government publishes its response to the report.
Chaired by
Sir John Vickers, the Independent Commission on Banking published its report in
September into ways of avoiding bank failures in the future.
It
recommended that a bank's retail business should be ring-fenced from its
investment business, with this and other recommendations being implemented by
2019.
There has
been widespread support for a government-backed commission that has recommended
UK banks ring-fence retail from investment banking.
The Vickers
report said it would "make it easier and less costly to resolve banks that
get into trouble".
Separate
entities
The report
recommends that ring-fenced banks should be the only operations granted permission
by the UK regulator to provide "mandated services", which include
taking deposits from and making loans to individuals and small businesses.
It says
that the different arms of banks should be separate legal entities with
independent boards.
ICB main
recommendations
- Ringfence retail from investment banking
- Keep 17-20% of certain assets as "loss-absorbers"
- New system to help customers switch current account
- Reforms to be implemented by 2019 at the latest
- Cost to banks of between £4bn-7bn
Another of
the ICB's recommendations is that banks must have a buffer to absorb the impact
of potential losses or future financial crises - of at least 10% of domestic
retail assets in top-quality form, such as shares or retained earnings.
That is a
stiffer target than the 7% recommended by the international Basel Committee on
Banking Supervision.
It also
says the biggest banks should go further than this and have a safety cushion of
between 17% and 20% of assets, made up of highest-quality assets topped up with
bonds that can be easily converted to equity.
The
business lobby group, the CBI, has said this would not help business.
The
commission also recommends that steps should be taken to make it simpler to
switch bank accounts, something that was welcomed by the CBI.
The ICB
wants a free current account redirection service to be formed by September
2013, with an improved system to catch all credits and debits going to a
customer's old, closed account, including automated payments on debit cards and
direct debits.
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