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| Vickers report on banks to be accepted in full - Cable | |
| (about 1 hour later) | |
| The government will accept the Vickers report into banking "in full", Business Secretary Vince Cable has told the BBC. | The government will accept the Vickers report into banking "in full", Business Secretary Vince Cable has told the BBC. |
| The report, launched in the wake of the 2008 financial crisis, recommended separating banks' retail business from their investment business. | |
| Mr Cable said: "We are going to proceed with the separation of the banks." | Mr Cable said: "We are going to proceed with the separation of the banks." |
| Chancellor George Osborne will give a statement to Parliament on Monday, after the government publishes its response to the report. | Chancellor George Osborne will give a statement to Parliament on Monday, after the government publishes its response to the report. |
| In the UK, the 2008 financial crisis started with Northern Rock being bailed out by the taxpayer, but went on to include both Lloyds and RBS receiving substantial sums of public money. | In the UK, the 2008 financial crisis started with Northern Rock being bailed out by the taxpayer, but went on to include both Lloyds and RBS receiving substantial sums of public money. |
| Chaired by Sir John Vickers, the Independent Commission on Banking was published in September and looked into ways of avoiding such bank failures in the future. | Chaired by Sir John Vickers, the Independent Commission on Banking was published in September and looked into ways of avoiding such bank failures in the future. |
| The report said it would "make it easier and less costly to resolve banks that get into trouble". | The report said it would "make it easier and less costly to resolve banks that get into trouble". |
| It recommended that a bank's retail business should be ring-fenced from its investment business, with this and other recommendations being implemented by 2019. | It recommended that a bank's retail business should be ring-fenced from its investment business, with this and other recommendations being implemented by 2019. |
| Mr Cable seems to be sticking to this timetable, promising that "primary legislation will be done in this parliament". | Mr Cable seems to be sticking to this timetable, promising that "primary legislation will be done in this parliament". |
| He told the The Andrew Marr Show: "Our big banks were at the very centre of the financial crisis, what the Europeans call Anglo-Saxon financial capitalism. It needs reform." | He told the The Andrew Marr Show: "Our big banks were at the very centre of the financial crisis, what the Europeans call Anglo-Saxon financial capitalism. It needs reform." |
| Separate entities | Separate entities |
| The report recommends that ring-fenced banks should be the only operations granted permission by the UK regulator to provide "mandated services", which include taking deposits from and making loans to individuals and small businesses. | The report recommends that ring-fenced banks should be the only operations granted permission by the UK regulator to provide "mandated services", which include taking deposits from and making loans to individuals and small businesses. |
| Even though the banks may disagree, it looks as if their expensive and intensive lobbying to get the Vickers report watered down has come to very little. Their only success has been the time frame. Banks will not be forced to partially split their investment banking divisions from their retail or High Street divisions until 2019 at the latest. | |
| But apart from that, banks will have to begin a process to completely rearrange their corporate affairs and raise billions in additional capital, which non-UK based banks will not have to do. | |
| Barclays boss Bob Diamond claims that the reforms will end up costing the entire banking industry up to £7bn. Before we all wipe our crocodile tears away, let's not forget who might ultimately pay for that in higher interest rates and lower borrowing amounts? You and me. | |
| It says that the different arms of banks should be separate legal entities with independent boards. | It says that the different arms of banks should be separate legal entities with independent boards. |
| Another of its recommendations is that banks must have a buffer to absorb the impact of potential losses or future financial crises - of at least 10% of domestic retail assets in top-quality form, such as shares or retained earnings. | Another of its recommendations is that banks must have a buffer to absorb the impact of potential losses or future financial crises - of at least 10% of domestic retail assets in top-quality form, such as shares or retained earnings. |
| That is a stiffer target than the 7% recommended by the international Basel Committee on Banking Supervision. | That is a stiffer target than the 7% recommended by the international Basel Committee on Banking Supervision. |
| It also says the biggest banks should go further than this and have a safety cushion of between 17% and 20% of assets, made up of highest-quality assets topped up with bonds that can be easily converted to equity. | It also says the biggest banks should go further than this and have a safety cushion of between 17% and 20% of assets, made up of highest-quality assets topped up with bonds that can be easily converted to equity. |
| The commission also recommends that steps should be taken to make it simpler to switch bank accounts. | The commission also recommends that steps should be taken to make it simpler to switch bank accounts. |
| The Vickers report wants a free current account redirection service to be formed by September 2013, with an improved system to catch all credits and debits going to a customer's old, closed account, including automated payments on debit cards and direct debits. | The Vickers report wants a free current account redirection service to be formed by September 2013, with an improved system to catch all credits and debits going to a customer's old, closed account, including automated payments on debit cards and direct debits. |