Coalition prepares for bank bust-up

There’s a big coalition split coming down the road. Next month the Vickers’ review into banking reform, which is going to suggest a ring-fencing of the investment and retail arms of banks, will come out. The Liberal Democrats — led by Vince Cable — will push for the instant implementation of the report’s recommendations. The Treasury will argue that banks need to be given time to introduce these new rules. The result will be, as one senior Lib Dem source tells this morning’s FT, ‘a big fight’.
 
The tricky question for Cameron and Osborne is how do they win this argument when there’s a visceral desire for tough measures against the banks? Ringfencing may well be the Maginot line of banking regulation, but if Cable&Co portray it as what’s needed to sort the banks out, they’ll likely have public opinion on their side.