BBA pushes for no ring-fencing - I think they are wrong

michaels

More announcements via the BBC:
http://www.bbc.co.uk/news/business-14874715

Seems like the fencer may be all the way round most of the UK operations of HSBC, Lloyds and Santander but not Barclays and and RBS.

Thrugelmir

michaels wrote: »

Seems like the fencer may be all the way round most of the UK operations of HSBC, Lloyds and Santander but not Barclays and and RBS.

You missed the point.

A major upheaval to Barclays and RBS as investment banking would need to be split away from retail.

chucky

IronWolf wrote: »

The rationale behind splitting retail and investment banking is that the retail banks remain immune to the losses of the investment arms.

building societies have been 'ring-fenced' for years. they've not avoided the recent financial issues.

Thrugelmir

chucky wrote: »

building societies have been 'ring-fenced' for years. they've not avoided the recent financial issues.

That will be addressed as part of the reform by increased capital reserves.
The reforms will extend far beyond just a split of activities in retail and investment..

Smaller building societies lost money through commercial property lending, having money invested in Icelandic banks, fraud or merely being unprofitable due to low base rates.

chucky

Thrugelmir wrote: »

That will be addressed as part of the reform by increased capital reserves.
The reforms will extend far beyond just a split of activities in retail and investment..

Smaller building societies lost money through commercial property lending, having money invested in Icelandic banks, fraud or merely being unprofitable due to low base rates.

and the bigger building societies that were ring-fenced, were they immune in the financial crisis?

so this ring-fencing... won't avert any financial crisis like Northern Rock whose business model worked only in a fluid money market or RBS who stretched themselves massively in the takeover of ABN or Halifax that had a very poor commercial loan book. this ring fencing fixes all that?

michaels

No - but at least it will mean that tax-payers will only be bailing out losses on consumer and business operations not losses on investment banking operations.

Thrugelmir

chucky wrote: »

and the bigger building societies that were ring-fenced, were they immune in the financial crisis?

Not building societies. They demutualised so fell under banking regulation.

chucky

michaels wrote: »

No - but at least it will mean that tax-payers will only be bailing out losses on consumer and business operations not losses on investment banking operations.

and the flip side is tax revenues will be less which means the government has less money and less people employed by the financial industry which makes them dependent on the government which means they will depend on the tax payer. what's the difference?

chucky

Thrugelmir wrote: »

Not building societies. They demutualised so fell under banking regulation.

they then became banks and weren't building societies...

that's why i said building societies and not banks. if building societies have been ring-fenced all this time, why weren't they immune from the financial crisis and not bailed out by the tax payer?

worldtraveller

UBS, the Swiss banking giant, has uncovered unauthorised trading in its investment bank which has led to an estimated loss of $2 billion (£1.3 billion).

The bank said in a statement: "UBS has discovered a loss due to unauthorized trading by a trader in its Investment bank.

"The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2 billion."

Steve Hawkes, the Business Editor of The Sun, tweeted: "Sir John Vickers will be chuffed with UBS given his ringfence calls - now where was the trader? NY, Switzerland or London (Peckham)" :rotfl:

While Robert Peston, the BBC Business Editor, said: "UBS's $2bn rogue-trader loss has not come at a great time for those who argue investment banking and retail banking should remain integrated."

Telegraph