The Bankwatch

Tracking the consumer evolution of financial services

Vickers report tomorrow will implement ringfence of retail bank operations

Some early indications tonight about the implications of the Vickers report tomorrow.  Ring fencing is in, but with the qualification that banks can pick what is in or out, and customers can pick too.

It will be interesting to watch the unintended consequences of the higher funding charges and how banks will allocate.

UK banks eye £6bn cost of reforms

As foreshadowed, the central recommendation of the Independent Commission on Banking, chaired by Sir John Vickers, will be that banks’ core operations – including consumer deposits and small business lending – must be ringfenced from the rest of their businesses.

The cost impact of the changes will mainly be the result of higher funding charges for the banks’ operations that are left outside the more highly capitalised ringfenced entity. In the eyes of investors, operations outside the ringfence will lose the benefit both of a government guarantee and of a broad bank’s current diversification.

Written by Colin Henderson

September 11, 2011 at 23:15

Posted in Uncategorized

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