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Sir John Vickers says banks should double capital ratios

FCA table
Sir John Vickers

Independent Commission on Banking chair Sir John Vickers is calling for banks to double their core capital positions as he seeks tougher banking reforms.

The FT reports Vickers, who led the Government’s inquiries into banking reforms, believes regulators should take much tougher action on bank capital when there are economic “blue skies” and conditions have improved.

He says banks should hold 20 per cent core tier one capital instead of the current 10 per cent requirements.

Vickers is also calling for a massive 10 per cent leverage ratio, which does not account for risk, compared to current Basel III requirements of just 3 per cent.

Labour and the parliamentary commission on banking standards both back higher leverage ratios of around 4 per cent but banks have lobbied hard against increases claiming it would hit mortgage lending.

Business secretary Vince Cable has attacked the Bank of England for its rough position, branding it the “capital Taliban” and calling for more help to boost business lending.

Vickers led the ICB which called for banks to ring-fence their retails arms from their investment divisions to prevent investment risks from affecting savers and to stop future bailouts.

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  1. Vickers. Explain how the capital ratios that you propose would have prevented the GFC and all the people that claim that your proposals will strangle any nascent recovery will demur. I suspect however that 20% just seemed like a round number.

    I have no desire to see another credit crunch or banks falling over but there must be a little nuance. Financial services is already the second most regulated industry after nuclear power.

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