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‘Ringfencing will not halt the recovery’

Members of the Independent Commission on Banking have dismissed claims that its reforms could damage the banking sector and the economic recovery.

As the ICB’s report was released this week, the British Bankers’ Association warned that the impact of the reforms on the economy and on banks’ ability to support customers must be fully understood.

Speaking at the report’s launch in London, ICB member and ex-JP Morgan co-chief executive Bill Winters insisted the reforms are not a disaster for banks or the economy.

He said: “There are vested interests that will try and shape our proposals to suit individual banks. It is quite natural but they should be pushed back aggressively.”

The commission estimates the annual pre-tax cost of the reforms will be between £4bn and £7bn, or between 0.09 per cent and 0.16 per cent of the balance sheets of the UK’s four biggest banks.

It puts the cost of the financial crisis at £40bn a year.

Responding to claims that the chief executive of a major UK bank believes the reforms will be “a disaster” for the economy and his bank, ex-Barclays chief executive Martin Taylor, who sits on the commission, said: “I have no sympathy. He should ask himself about the bank’s business model.”

The ringfencing of banks’ retail arms is designed to put an end to the implicit Government subsidy that they will be bailed out if the investment arm fails.

Commission member and Financial Times journalist Martin Wolf dismissed concerns that banks will move abroad, saying they would struggle to find a similar arrangement in another jurisdiction.

Chairman Sir John Vickers said the reforms should not be blown off course by the concerns. He said: “We cannot allow the too big to fail problem to become a too delicate to reform one.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. Bill Winters is 100% right.

    And… Ring-fencing is the bare minimum required – as retail deposits have for years meant to be ring-fenced from the investment bank gambling in the world’s markets. Already!

    The credit crisis would be weaker if proper regulatory oversight had been functioning. Still there are bankrupt banks using accountancy tricks to pretend that they should keep their license – and the regulators play along.

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