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Government set to approve banking split

The Government is set to approve calls for a separation of a banks’ retail arm from its investment activities.

The move was made by Sir John Vickers in his report into the banking system in the wake of the 2008 financial crisis.

Speaking to the BBC, Business Secretary Vince Cable (pictured) said the Government would accept the report “in full”.

He said: “Our big banks were at the very centre of the financial crisis, what the Europeans call Anglo-Saxon financial capitalism. It needs reform.”

The Independent Commission on Banking, was set up by the coalition Government last year to review the financial sector after the crisis.

In its report, published in September, 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.

The BBC says only one proposals is set to be amended from what has been recommended in the Vickers’ report. This proposal is that banks should have enough capital plus loans that could be converted into cash to cope with losses equal to one fifth of the size of their total balance sheet.

The Treasury is to soften this by making banks raise cash and loans equivalent to 20 per cent of the part of their balance sheet, which UK taxpayers would have to support in a crisis.

Other proposals in the report included banks having a buffer to absorb the impact of potential losses or future financial crises of at least 10 per cent of domestic retail assets in top-quality form, such as shares or retained earnings.

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