The publication of over 170 responses from banks, businesses and individuals to the Independent Commission on Banking report came out today, revealing general areas of consensus regarding the reforms of the troubled sector.
The report was commissioned to restructure the banking system after the economic crisis. The main area of debate, regarding the ring fencing of the retail section of banks, led to respondents stressing the risks that could be created from making such a change to the UK banking system.
RBS believed that ring fencing would bring significant economic costs and make UK banks ‘riskier in the eyes of creditors and rating agencies’. Barclays didn’t believe any ring fencing was necessary. The international bank highlighted the concern of such a measure being implemented solely in the UK, and additionally not to EU banks operating in the UK through EU passporting arrangements.
HSBC emphasised that, if ring fencing became policy, it would be most effective when separating the trading books from the underlying core UK banking activity.
In contrast, many of the top building societies such as Yorkshire and Nationwide supported in principle the ring-fencing proposals. Nationwide did however believe that much greater consultation was needed before anything was enacted. This view was echoed by auditor KPMG, which highlighted the vagueness in the report concerning how ring-fencing would be enacted as a drawback to the proposals.
The account number portability proposal, an idea to improve the ease of depositors changing banks, was also criticised by Barclays. The UK’s fourth biggest bank believed any improvements to be limited, and ‘outweighed by the cost of implementing such a regime’. Global management consulting firm Accenture highlighted that ‘UK switching rates for personal current accounts are close to the EU average, and that switching rates for other products (mortgages, savings and personal loans) are relatively high by EU standards’.
Which, the consumer organisation, argued that banks should guarantee that switching account providers should not have any effect on a consumer’s credit rating.
In other areas, many respondents agreed that the comfort of government support in the event of failure should be abolished. Yorkshire Building Society wanted to rid certain banks of their ‘too big to fail’ belief, and Barclays accepted the reforms needed to ‘remove the market’s perception of an implicit government guarantee’. Many also advocated greater competition in the banking market to be beneficial, and this unsurprisingly included Virgin Money.
The Commission will consider all views proposed by the respondents and produce its final report on Monday 12th September this year. All responses, including some amusing rants from individuals, can be viewed at: http://bankingcommission.independent.gov.uk/?page_id=835