Independent commission on banking: Interim report

The Independent Commission on Banking proposals have critical implications for the banking industry, consumers and economic growth, though a number of key issues are yet to be resolved.

The issues raised remain controversial. Some will see the recommendations going far enough while others will see the need for more radical change. As an industry we all need to be clear on the objectives and then there is a greater chance we can build consensus.

The social and economic costs of the financial crisis continue to weigh heavily on the UK. The ICB’s interim report offers far-reaching proposals on how to avoid a repeat of the bailouts, though a number of uncertainties remain.

These include the nature and extent of separation, which will determine how quickly the proposals can be implemented and how much they will affect banks’ funding, capital charges and returns. How these practical issues are resolved will have a crucial impact on whether the objectives of protecting tax payers and bolstering competition are met.

Considerations for taxpayers

  • Would these measures have avoided the publicly-funded bailouts seen during the crisis?
  • Would you still have to foot much of the bill for a future crisis as the Government will continue to guarantee deposits?
  • To what extent does ring-fencing make resolution of a failed bank easier?
  • To what extent could these measures have unintended consequences?

Consideration for bank customers

  • How much more could borrowing cost and can you and the economy as a whole afford it?
  • To what extent will higher capital requirements deter new entrants and inhibit competition?
  • Could making it easier to switch accounts undermine the stability of deposits as a source of funding?

Considerations for banks

  • To what extent will the measures affect funding costs and capital requirements?
  • What level of ring-fencing would be most workable strategically and operationally?
  • What are the implications for the competitive landscape in the UK and overseas?
  • Do the reforms open up new opportunities for some institutions and who are the winners likely to be?
  • Where is the most attractive place to base your business?