Lloyds Banking Group Plc Chief Executive Officer Antonio Horta-Osorio criticized U.K. banks pushing to weaken rules that force lenders to separate consumer operations from riskier trading units.
The Bank of England requirement for lenders to erect the firebreaks would increase financial stability and lower funding costs, the CEO will say in a speech Thursday at a British Bankers’ Association conference in London, according to extracts released by Lloyds.
“Ring-fencing is happening -- the industry should accept this and move on,” he will say, according to the statement. “The principle behind it is right, that is to minimize the possibility of the failure of a bank being again a burden on the British taxpayer.”
HSBC Holdings Plc CEO Stuart Gulliver said last month the U.K. has “rejected the concept of universal banking,” as the bank reviews whether to relocate its London headquarters amid higher taxes and the tougher rules. Lloyds, Britain’s biggest mortgage lender, is seeking a waiver on a requirement to have a separate board of directors for its consumer bank, a person with knowledge of the matter has said.
About 90 percent of Lloyds will sit within the firebreak, in contrast with lenders such as HSBC and Barclays Plc, which have larger trading divisions.
“To people who say ring-fencing is ‘too burdensome,’ I would simply say that having an effective ring-fence can, over time, reduce the level of capital required in the banking sector,” Horta-Osorio will say.
The U.K.’s Prudential Regulation Authority, a unit of the BOE, requires lenders with more than 25 billion pounds ($39 billion) of deposits to build the firebreaks by 2019.
The plans, proposed by John Vickers’s Independent Commission on Banking, seek to ensure that core services such as consumer deposits and payments will be protected if riskier investment-banking divisions incur losses and have to be shut down.