Business Secretary Vince Cable said he expects Britain’s Independent Commission on Banking will lead to “radical surgery” to protect banks’ retail arms from the activities of their investment units.
Cable, a Liberal Democrat member of the Conservative-led government, said in a Bloomberg Television interview that ministers had appointed to the commission “expert surgeons” whose conclusions would trigger “greater competition and some form of break-up or separation of the different activities of the banks.”
ICB chairman John Vickers, an Oxford University professor and former Bank of England chief economist, said on Jan. 22 that he was examining the ring-fencing, or subsidiarization, of investment and consumer-banking units, while ruling out a full break-up. Barclays Plc, HSBC Holdings Plc and Royal Bank of Scotland Group Plc all oppose such a move.
“The reason why rich bankers are in a different position from footballers and racing drivers is that they’re dependent on a taxpayer guarantee,” Cable said late Feb. 11. He said that his goal for banks was “if there is a casino arm and it’s standing alone, it can then operate as a hedge fund and it can go bust. It’s going to require radical surgery.”
The five-member inquiry is halfway through its examination of the industry. The review seeks to increase competition and financial stability. It will report to Chancellor of the Exchequer George Osborne in September.
“There’s been a certain amount of tension in the debate,” Cable said. “I’m pretty certain the government will follow their advice.”
Barclays Chief Executive Officer Bob Diamond said last month that the “the integrated, universal banking model is safer and sounder and better for jobs and economic growth.”