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Banking commission: can you help Sir John and co make up their minds?

(Update) Sir John Vickers, chairman of the new Independent Commission on Banking, has appealed for the public's help as he prepares to launch an inquiry into the UK banking system.

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by Gavin Lumsden on Sep 24, 2010 at 13:15

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Banking commission: can you help Sir John and co make up their minds?

(Update) Sir John Vickers, chairman of the Independent Commission on Banking, has appealed for the public's help as he prepares to hold a year-long inquiry into reforming the UK banking system after the credit crunch.

The commission, established by the government in the summer, intends to hold a series of public meetings this autumn alongside hearings with senior bankers this autumn to ask 'hard questions' and discuss ways to avoid a repeat of the 2008 banking crisis. It will publish its main options for reform next spring, consult on these and present its recommendations to the government in September 2011.

Sir John, former chairman of the Office of Fair Trading, said he was entirely open-minded about the debate that would take place and stressed, 'anyone can make submissions'.

Vickers said: 'Questions about the structure of banking need to be debated in an open, rational way, and we would like to invite anyone with an interest to provide us with news and evidence.'

The commission does not have statutory powers and so cannot compel banks to participate. However, Sir John hoped banking chiefs would take a 'positive and constructive' approach to his team's inquiry.

Asked if he was concerned at the threat of UK banks moving abroad if they were forced to separate their investment and retail operations, or face tough restrictions on bonuses and conduct of business, Sir John replied. 'Sometimes I wonder if people consider how sharp a conflict between the interests of banks and the wider public they are suggesting.' He urged the banks to look at the bigger picture, adding 'stability is good for banks'.

To kick off its work the commission has published an issues paper today that sets out the approach it will take to its inquiry and the pros and cons of the main ideas so far.

The commission's formal remit is to examine the 'structural and related non-structural reforms' to prevent excessive risk taking by banks that are 'too big to fail' and require government bail outs when things go wrong.

Proposals so far include:

separation of retail and investment banking - but the commission asks if the abolition of 'universal' banks would really have prevented the financial crisis?
going further to create 'narrow' banks focused on basic retail banking services - this too causes problems as there would unlikely be enough government bonds to back high street deposits, says the commission.
limits on risky proprietary trading and investing by banks so they don't endanger their retail operations
creating plans for 'living wills' and resolution schemes that would make it easier for authorities to take control of banks in crisis
increasing the sources of capital banks must hold.

There are four members of the commission reporting to Sit John. From the banking world, Martin Taylor, former chief executive of Barclays, and Bill Winters, former joint boss of JP Morgan investment bank. Representing consumers are Clare Spottiswoode, former director general of Ofgas and more recently policyholder advocate of Aviva, the insurer, and Martin Wolf, chief economics commentator of the Financial Times.

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9 comments so far. Why not have your say?

Another waste of public funds

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The point here is surely one that the UK government's deposit guarantee scheme should be limited to UK residents only assuming the underlying assets are held by UK residents. The international business of all UK banks needs to be segregated along with its investment banking activity where the higher risks and rewards can be earned for shareholders. Any UK resident depositing with the international side of a banks business will gaim higher rewards for the risk undertaken BUT will not be protected by UK government.

All banks should know their counterparties to any transaction and this should be the case in ALL buisness going forward.

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re joe Stalin

As the fromer head of OFT Sir John must have come across a lot of banking problems at grass roots level.

His experience should assist him in finding answers to difficullt banking issues, that we all know about.

Give the man a chance.

Constructive ideas please.

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Vince Cable's outburst to his Party's Conference, undermines his ability and experience & must place him in 'need to review his role' position, if I were his boss.

We need to remain a competitive and an attractive domicile for Banking HQs.

Therefore, if you remove risk from banking, you will remove Banking HQs from the UK

Please remain attached to reality, would be my plea.

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May I also ask that we do away with the 'politician's rhetoric' with regard to the Inquiry. Just be balanced, fair & effective, in your review & judgement!

We are fed-up hearing about what is going to be done......... with little or no reportable result!!

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The starting point must be a rejection of the claim from the banking industry that there is a shortage of quality people with the experience to fill the top banking jobs which leads to competition from the many for the few. I don't buy that. Look below the top layer in any big business and there is a wealth of suppressed talent waiting for an opportunity to leap to the top. We are in a situation where we are employee rich and employment poor. It therefor follows that the situation is the opposite of that claimed by the banking industry elite, in whose interest it is to raise salaries and bonuses into the stratosphere.

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The problem with the retail side of the banks is lack of competition. We need more banks, and smaller banks, which do not impact on the whole economy if they fail.It would help business if it was possible to shop around for better rates and eventually we could reduce our reliance on the City.The economy needs more manufacturing, as well as retaining the banking sector.

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If you take the investment arm out of the banks, how will they raise the money to pay interest to their savers? I think I am being ripped off when my bank pays ½% interest, if I am lucky, but charges 20% when I overdraw. I understand there being a difference but 40 times seems excessive.

If they take the investment arms out of the banks then EVERY account will have to charge a fee. It will be the end of any idea of 'free' banking.

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da hay

Dec 15, 2010 at 17:29

the difficulty i see, is that there is no currnet or reasonible alternative to using the banking system for normal everyday living of the general population.

as i am now an elder i can recall back in the 1960's when we had a weekly cash wage packet, and therefor many workers did not need a bank to live in the community.

you try and do that today, and you get immediately into difficulty as a lot of bills require you to pay by direct debit.

the banking system is a monopoly, and they know it, that is why they dare to suggest that they make a charge for our use of their banking system.

it is nothing more than plain unadulterated GREED BY THE BANKS TO SUGGEST MAKING A CHARGE WHEN THEY ARE A MONOPOLY AND WE HAVE NO ALTERNATIVE..

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