"Moderate" ICB report stops short of breaking up the banks
The chairman of the Independent Commission on Banking (ICB) report has denied claims that he and his team “bottled it” under pressure from banks and politicians.
The eagerly awaited report published its findings on Monday, April 11 to a mixed response. As predicted, its key suggestion was that big banks’ retail wings should be ring-fenced from their investment operations.
The report stopped short, however, of suggesting a radical division of ‘universal’ banks such as RBS and Barclays into independent retail and investment banks, and was criticised for recommending vague and disappointing changes.
Pointing to the importance of keeping Britain competitive for business, Sir John strongly refuted such claims, insisting “I absolutely reject any notion that we bottled it. These are absolutely far-reaching reforms. In the modern history of UK banking, if these reforms were implemented I think this could be absolutely transformative”.
The report’s “moderate” suggestions, however, have been met by “a sigh of relief” in the City according to Paul Mumford, senior fund manager at Cavendish Asset Management: “The ICB's bark has proved much worse than its bite and its recommendations won't seriously damage the competitiveness of the sector”
The report also recommended that banks hold more core capital, around 10% of a bank’s loans, and in a surprise move also recommended significant divesture from the Lloyds banking group.
Though the report did not specify how much of its market share Lloyds would have to concede, analysts have estimated that as much as double the current figure of 600 branches could be lost.