It’s the moment of the truth for Britain’s banking sector: the publication
of the Vickers report. The headline is as expected: the Commission recommends the imposition of a ringfence on banks’ ‘core operations’ (such as consumer deposits and small
business lending) from the riskier elements of their business. According to the FT (£), the
banks will have discretion over where the ringfence will fall, giving lenders and users a degree of flexibility, which suggests that Vickers is not recommending the full separation of retail and
investment banking, as some had hoped.
Vickers also proposes that banks reserve 10 per cent of the capital in their ringfenced operations to guard against future crises, which is expected to cost as much as £7 billion annually. As one might expect, the airwaves have hummed to discussion about those attached costs. Vickers has said that he envisages profitable banking arms lying outside the ringfence to meet those charges, so costs should not be passed onto high street and small business consumers.
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