The announcement by Britain’s Chancellor of the Exchequer George Osborne that the government will “electrify” the ring-fence between retail and investment banking in the Banking Reform bill, did not please the bankers.
The Daily Telegraph cites one unnamed analyst from Crédit Suisse complaining that the legislation will “devalue” universal banks and is tougher than regulations in Europe where treasuries are trying to get away with implementing “Liikanen LITE,” referring to the ringfence proposals by the European Union’s Liikanen Commission report.
Anthony Browne, chief executive of the British Banking Association, said, “No other major economy is considering moving away from the universal model of banking because it undermines banks’ ability to provide all the services businesses need. This decision will damage London’s attractiveness as a global financial center.”
By contrast Andrew Tyrie, chairman of the Parliamentary Commission on Banking Standards, is quoted as having said: “A reserve power to split up any bank that tries to undermine the integrity of the ring-fence will increase the chances of its success. Banks require discouragement from gaming the rules. They will always try to do so unless strong disincentives are put in place.”
The Labour Party’s shadow treasury minister Chris Leslie said: “If the Chancellor is now being dragged towards a partial climb-down, this is a step in the right direction. We must see fundamental cultural change in our banks. If this does not happen then banks will need to be split up completely, as we made clear in the autumn.”