Osborne Says Way Clear for U.K. to Begin Vickers Bank Overhaul

Chancellor of the Exchequer George Osborne said there is “political agreement” on bank capital rules among European Union members after securing concessions that will allow Britain to toughen requirements on its banks.

Osborne said the agreement means Britain can begin legislation to implement the recommendations of the Independent Commission on Banking led by former Bank of England Chief Economist John Vickers.

“I suspect the markets will be pretty unforgiving to national regulators who don’t comply with Basel” capital rules, Osborne told finance ministers meeting in Brussels today. Amendments agreed on today “will allow us to implement the Vickers report.”

Osborne argued at a 16-hour meeting earlier this month for member states to gain additional flexibility to toughen rules for their banks. His concern then was that proposals could prevent the U.K. from fully implementing a rule overhaul for its lenders recommended by Vickers.

Vickers wants banks to erect firewalls around their retail operations and increase the amount of capital they hold to protect them from future financial crises. His proposals would see some banks forced to hold core reserves of 10 percent of their risk-weighted assets.

Governments and lawmakers in the 27-nation EU face a January deadline to implement the Basel bank rules, which were agreed on by the Basel Committee on Banking Supervision in the wake of the 2008 collapse of Lehman Brothers Holdings Inc. The measures, known as Basel III, would more than triple the core capital that banks need to hold to 7 percent of their assets, weighted for risk. Basel agreements must be implemented into nations’ laws before they can come into effect.