UK Banks to be split.

[Lost Soal]

bbc

Vickers report on banks to be accepted in full - Cable

The government will accept the Vickers report into banking "in full", Business Secretary Vince Cable has told the BBC.

The report, launched in the wake of the financial crisis, recommended separating banks' retail business from their investment business.

Mr Cable said: "We are going to proceed with the separation of the banks."

Chancellor George Osborne will give a statement to Parliament on Monday, after the government publishes its response to the report.

In the UK, the financial crisis started with Northern Rock being bailed out by the taxpayer, but went on to include both Lloyds and RBS receiving substantial sums of public money.

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

It published its report in September and looked into ways of avoiding such bank failures in the future.

The report said it would "make it easier and less costly to resolve banks that get into trouble".

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.

Mr Cable seems to be sticking to this timetable, promising that "primary legislation will be done in this parliament".

He told the The Andrew Marr Show: "Our big banks were at the very centre of the financial crisis, what the Europeans call Anglo-Saxon financial capitalism. It needs reform."

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.
Continue reading the main story

It says that the different arms of banks should be separate legal entities with independent boards.

Another of its 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 commission also recommends that steps should be taken to make it simpler to switch bank accounts.

The Vickers report 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.

Analysis
Joe Lynam BBC News

Even though the banks may disagree, it looks as if their expensive and intensive lobbying to get the Vickers report watered down has come to very little. Their only success has been the time frame. Banks will not be forced to partially split their investment banking divisions from their retail or High Street divisions until 2019 at the latest.

But apart from that, banks will have to begin a process to completely rearrange their corporate affairs and raise billions in additional capital, which non-UK based banks will not have to do.

Barclays boss Bob Diamond claims that the reforms will end up costing the entire banking industry up to £7bn. Before we all wipe our crocodile tears away, let's not forget who might ultimately pay for that in higher interest rates and lower borrowing amounts? You and me.

What, no claims that the banks will leave Britain, or did they already try that as part of their lobbying against the Vickers report? How about saying where the £7bn figure comes from, besides his ass.
This sounds like good news, now if only the US will do this the chances of another global crash can be reduced.

[KrauserKrauser]

UK is going implement their own version of Glass Steagall. Good. 2019 is a bullshit target though this needs to be completed asap.

Little chance of this happening in the US too many banking industry cronies in positions of power and too much money coming from the TBTF for this to be allowed to go forward.

[Starglider]

This sounds like good news, now if only the US will do this the chances of another global crash can be reduced.

The purpose of this is not to prevent another crash; removing retail deposits as a source of capital will if anything increase leverage in investment banks. Rather the purpose is to reduce the ability of banks to blackmail governments into bailing them out by threatening to cut off depositors from their funds and possibly bankrupt government deposit insurance funds.

2019 is a bullshit target though this needs to be completed asap.

That would cause several banks to at minimum utterly fail Basel III capital requirements and possibly become outright insolvent. The UK doesn't have any particular desire to leapfrog France & Italy in 'who can experience the most bank failures'.

[Eulogy]

Anything that lynches the bankers figuratively rather than literally is a good step, but I can't help but feel that if banks tried to stop people from getting their money, then the people will get their money in a less... usual way.

[Simon_Jester]

Don't be stupid. The money, by and large, only exists on the banks' computers; there's comically little in a physical bank to rob compared to the combined accounts of everyone who does business there. That goes double for banks with an investment arm.

Trying to loot bank branches wouldn't do a damn thing to ensure that the average citizen gets their money back in the event of a bank collapse. All it would do is contribute to the overall economic and social chaos, ensure that what money does get dispersed winds up in the hands of a bunch of thugs, and make the entire cause of "not letting banks screw over citizens" look like an excuse for thuggery.

[Col. Crackpot]

Don't be stupid. The money, by and large, only exists on the banks' computers; there's comically little in a physical bank to rob compared to the combined accounts of everyone who does business there. That goes double for banks with an investment arm.

Trying to loot bank branches wouldn't do a damn thing to ensure that the average citizen gets their money back in the event of a bank collapse. All it would do is contribute to the overall economic and social chaos, ensure that what money does get dispersed winds up in the hands of a bunch of thugs, and make the entire cause of "not letting banks screw over citizens" look like an excuse for thuggery.

The average bank branch depending on size , loacation and day of the week only has between a couple to several hundred thousand dollars. The bulk of which is held in such a manner that it would not be possible to obtain prior to the arrival of law enforcement en masse.

[Thanas]

This is a good move by the UK and good on them for not bowing down to lobbying like some other countries in Europe.