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There’s been a cautious welcome for the interim report of the Independent Commission on Banking. Most commentators forecast that the real battle has yet to be fought when the Commission ties up the loose ends with its final recommendations in September.Structural changes to the UK’s biggest financial institutions are proposed by the Independent Commission on Banking led by Sir John Vickers.Its interim report also has suggestions on how consumers can be given a better deal.Proposals include:
The report acknowledges that consumers face restricted choice caused by difficulties in comparing and switching accounts, and it outlines how banks could make it easier for customers to shop around. The main reactions to the interim report (the final one is due in September) include:‘No more bail-outs’:Our goal is to make sure that in future we have safer banks, but also that millions of pounds of taxpayers’ money is not spent again bailing out those banks.GEORGE OSBORNE MP Chancellor of the Exchequer‘Robust firewalls’:To protect customers and taxpayers we need tough accountability and transparency and clear, workable and robust firewalls. The devil will be in the detail of the commission’s final proposals, but we must get this right.ED BALLS MP Shadow Chancellor‘Significant change’:Banks in the UK have already undergone significant change since the global crisis, including significantly increasing their capital and liquidity and establishing resolution plans, to protect depositors and to keep finance flowing, should a bank get into difficulty.The British Bankers’ Association‘Bigger airbags’:Capital isn’t the be-all and end-all. It’s just one of the many tools that can be used to control the effects of major loss events. To believe greater capital requirements will solve the problem is like encouraging motorists to fit bigger airbags rather than urging them to be safer drivers.Dr SIMON ASHBY Financial Services Research Forum‘Who pulls the trigger?’:Ring-fencing the retail arms will, by definition, create ‘living wills’, meaning that if one part of the bank fails, the rest can be saved. But the ICB hasn’t addressed the crucial issue of who in the bank should pull the trigger and when. With individual countries introducing their own rules, the capital requirements specified in Basel 3 are rapidly becoming the lowest common denominator.AJAY RAWAL Senior Director, Alvarez & Marsal‘Heated discussions’:You really have to question whether a faster switching process or being able to keep the same account number will change consumers’ attitude to changing banks. No doubt, the discussions will continue until the commission’s final report is published in September 2011. Thereafter, they may become even more heated.ANDREW HAGGER Moneynet
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