How well is the government planning to implement the proposals of the Independent Commission on Banking, chaired by Sir John Vickers, of which I was a member? Rather well, on the whole.
But I have some important concerns.
This is how George Osborne, UK chancellor of the exchequer, explained the government’s intentions at the Mansion House dinner on Thursday: “High street banking will be ringfenced so that taxpayers are better protected when things go wrong.
We will be able to bail in creditors when a bank fails rather than turning to the public purse.
And I believe that we have found a workable way to solve what I called the ‘British dilemma’ – so we are proposing to protect taxpayers in a way that does not make the UK uncompetitive as a home of global banks.” As the ICB’s interim report noted, the assets of UK banks were close to five times gross domestic product in 2009, against just one time in the US and three times in Germany and France.
Against this background, the ICB made two principal recommendations relating to financial stability: the ringfencing of domestic retail banking from other banking activities and a need for greater loss-absorbing capacity, in the form of both equity and “bail-enable debt”.
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