The Independent Commission on Banking has recommended the retail operations of UK banks should be ring-fenced but stopped short of calling for a complete separation of retail and investment banking.
In its interim report, published today, the commission suggests that retail banking should form a separate subsidiary within banking groups.
The ICB, headed by Sir John Vickers, also suggests banks should be forced to hold 10 per cent of capital, 3 per cent higher than the new Basel III minimum, and calls for new rules to make it easier for individuals to switch banks. In a speech last month, FSA chairman Lord Turner warned that the Basel III requirements did not go far enough.
The report wants Lloyds to be forced to sell off a greater number of branches than is currently planned. The bank is set to sell off 600 branches at present due to European Commission rules.
The Financial Times reports that banks expect the new measures to cost around £5bn, far less than more radical options such as creating a clear split between retail and investment banking.
A British Bankers’ Association spokeswoman says: “The Commission’s proposed options will have to be considered alongside other reforms underway at a national and international level. Banks in the UK have already undergone significant change since the global crisis, including significantly increasing their capital and liquidity and establishing resolution plans, to protect depositors and to keep finance flowing, should a bank get into difficulty.”
More to follow.