UK banks may see biggest reform in decades
Watch Video
Play VideoBritain's banks may be forced to separate retail banking from the investment business. This is seen as one of the biggest reforms in decades. The measures are said to be aimed at protecting the bank's customers.
Britain's banks could be about to see the biggest shake-up of the industry in decades.
They're expected to be forced to separate retail banking from the riskier investment business.
The reforms are meant to protect the bank's customers and the taxpayer should the banks fail in the future.
The UK's Finance Minister George Osborne was expected to back the plan drawn up by banking regulators during a speech late on Wednesday.
George Osborne arrives at his
residence in Downing st, London,
June 15, 2011.
He reportedly supports the idea of banks keeping more cash in reserve for retail banking operations.
Bob Parker, senior advisor at Credit Suisse agrees the proposals should help reduce the risk.
Bob Parker is a senior advisor at Credit Suisse, saying
He said, "What the treasury want to avoid is how to deal with another shock like Northern Rock or the problems for RBS and Halifax Bank of Scotland got into and if there is a high degree of capital and there is this ring-fence around the domestic banking operations the risk is not completely avoided. But let's just say the ris! k is sig nificantly reduced of a repeat of UK domestic banking problems."
If the plans are approved the banks operations will be split into separate legal entities so one can fall without the other.
But the changes could be costly, 12 billion pounds according to one estimate.
And there are fears - says Richard Lloyd of Which Magazine that customers will have to foot the bill.
He said, "The Banking Industry always threatens that they're going to put up fees and charges whenever there's reform and that's exactly whey we need a strong regulator to protect consumers from rip-off charges and also to see more competition on high streets so that consumers can shop around and get a better deal."
The top banks are split on whether ring-fencing is a good idea.
HSBC is in favour while Barclays is not.
Bob Parker is a senior advisor at Credit Suisse, saying ..
He said, "I think it's rational that you have this disagreement between the banks because if you look at the big four banks they have very different models."
The commission's final recommendations will be published in September.
Shares in LLoyds, HSBC and Barclays fell as the news emerged.
Comments