Vickers report on UK banking reform

12 Sep 2011 ReutersVideo
The final report as expected has recommended the separation of banks' retail operations from the rest of their businesses to protect them from their riskier investment-banking arms.

- ICB estimates costs of "ring-fence" plans at 4-7 bln pounds
- Says should be fully implemented by 2019
- Banks need loss-absorbing capital of 17-20 per cent

(Nick Bullman)
Whilst it addresses some of the competition issues it may fail on the stability side or the risk side. The UK balance sheet represented 460% of UK GDP. The crisis would have occurred within the ring-fence not without it [Not necessarily! Macro-prudential regulation of the right type can achieve it].

(Presenter)
Most of the higher cost will be felt outside of the retail ring-fence. But isn't the whole group affected by the cost?

(Nick Bullman)
Yes. Remember the ring-fence only creates subsidiaries not separate legal entities. Therefore the overall cost will be absorbed by the bank not the investment bank [Absolutely].

(Presenter)
We've got to bear in mind that the problems that occurred 2 or 3 years ago weren't the result of the investment banks, they were actually the result of problems in the retail banks. Are people missing something here? [I shed tears for people like this]

(Nick Bullman)
I think the problem is the regulation is pointed at the banking community rather than at business practices within the banking community [Absolutely, but how?]

(Presenter)
So that's what we need to be addressing. Stop people from borrowing so much money?

(Nick Bullman)
Yes I suspect the first thing is to have a very highly educated retail customer base so that they understand the risk. The second is to have boards with executive and non-executives that are strong and can control the banks themselves. And the third is a strong financial regulator [This last bit is the only thing that is required.]


On higher costs to banking and a loss of competitiveness --

"This report makes UK banking less competitive on a global basis. So I suspect they want to see what the markets' reaction will be and also see what other financial regulators do."


[Perhaps but this is irrelevant really. A banker sitting in a UK office is not the same as a monkey with a briefcase in some tropical island. The UK is safe. People should realize the expertise and commitment of the UK government to protect its (tax-paying) depositors.]


"The increasing competition is positive but ultimately the additional costs will flow through from increased funding costs in the banking system as a whole."


[He would be right if investors can get their money easily from other countries. I don't think they can anymore. This crisis has forced us to uncover the true net value of all countries and the actual soundness of localized financial systems.]

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[optionsupdate]

bankers control politics so nothing will happen to reduce their earnings.

[MrNChoudhury]

@optionsupdate

You are right it's the same system. The more cynical view is that Vickers is just a front man.

Except for one thing..when all they have left is burnt out balance sheets and no assets they won't have a penny left. It's in their best interest to behave somewhat responsibly if it would save the system from collapse. Now if we crush them like ants they will just flee to the bahamas. But if we can somehow entice them to behave prudently then everybody surely can benefit?

[optionsupdate]

"Alan Grayson Questions CEO Edward Liddy on AIG Cover-up" watch that youtube video to see the cover up. (2min video)

[optionsupdate]

a parasite does not abandon its host. Its weird how the names of these destroyers must be kept secret, in the US before a congressional hearing the new boss of AIG refused to name the 22 people responsible for destroying AIG, and in UK toryboy refused to name people who earned more than 1 million while working for banks which had been bailed out by UK taxpayer sucker