KAPOW UK will force banks to seperate.

geneer

I do hope that even our resident non-bulls can agree that this is very good news indeed.

Though of course why would they. I mean the economy is in fine nick, the housing market is doing swell so why bother.

http://www.bloomberg.com/news/2011-12-18/u-k-to-force-banks-to-separate-consumer-units-from-investment-businesses.html

The U.K. will force banks to separate their investment and consumer businesses as part of its acceptance of the findings of the John Vickers-led Independent Commission on Banking, business secretary Vince Cable said.
“Tomorrow, the government is going to launch this initiative on the banks, accepting in full the Vickers commission,” he told BBC television today. “We’re going to proceed with the separation of the banks, the casinos and the business lending parts of the banks.”
Former Bank of England Chief Economist Vickers recommended in a Sept. 12 report that banks build fire breaks between their consumer and investment banks and boost the amount of loss-absorbing equity and debt they hold to between 17 percent and 20 percent. Since 2007, the government has had to spend, pledge and loan 850 billion pounds ($1.3 trillion) to rescue British banks.
“These are vital reforms to protect taxpayers and consumers in the future, which the government must get on and legislate for rapidly,” lawmaker Chris Leslie, who speaks for the opposition Labour party on financial matters, said in an e-mailed statement. “The independent commission should be asked to publish a report in 12 months on what progress has been made in implementing and legislating for these reforms.”
The announcement comes a week after Prime Minister David Cameron refused to join a European accord to stem the euro region’s debt crisis because it wouldn’t give the U.K. the right to veto future financial regulations. The Vickers proposals are part of the government’s effort to prevent another financial crisis and shield the taxpayer from future bailouts.
‘Too Big to Fail’

“We cannot risk having a repetition of that financial catastrophe that we had three years ago,” Cable said. “We can’t have a position where the banks are too big to fail.”
Chancellor of the Exchequer George Osborne will say in Parliament tomorrow that the government will enact the reforms stemming from the report and the Treasury will publish its response. The changes are to be implemented by 2019.
The units inside the fire breaks will include all checking accounts, mortgages, credit cards and lending to small- and medium-sized companies, the report said in September. As much as a third of U.K. bank assets, or about 2.3 trillion pounds, will be included, the document said. Trading and investment banking activities will be excluded from the ring-fence. Standard & Poor’s said Sept. 14 the elements of a bank outside the ring fence face a credit-ratings cut as they won’t be able to count on government support.

Cleaver

I've always thought that it's complete and utter common sense to have the retail part of the bank seperate from the 'casino' part of the bank (as I heard Vince Cable call it this morning).

By all means if your retail bank makes lots of profit transfer it to the investment side of the bank and invest it. But ensure that the retail part of the bank remains solvent.

Weird really that it hasn't always been this way.

TruckerT

geneer wrote: »

I do hope that even our resident non-bulls can agree that this is very good news indeed.

Though of course why would they. I mean the economy is in fine nick, the housing market is doing swell so why bother.

http://www.bloomberg.com/news/2011-12-18/u-k-to-force-banks-to-separate-consumer-units-from-investment-businesses.html

So it is confirmed - the banks have until 2019 to reorganise themselves so that they will remain immune to usual market forces

And who will do our day-to-day banking after 2019?

TruckerT

Cleaver

TruckerT wrote: »

And who will do our day-to-day banking after 2019?

The same companies that do now I imagine. But hopefully with a few new faces to offer a bit more options. Generali has posted on here a few times some interesting nuggets on how hard it is to open up a new retail bank in the UK, so it'd be nice to see them allow some new companies in.

geneer

TruckerT wrote: »

So it is confirmed - the banks have until 2019 to reorganise themselves so that they will remain immune to usual market forces

And who will do our day-to-day banking after 2019?

TruckerT

The same people who did it before the tories gave the banks the keys to the drink cabinet, a box of matches, and told them they could look after the house until the parents got home.

TruckerT

Cleaver wrote: »

The same companies that do now I imagine. But hopefully with a few new faces to offer a bit more options. Generali has posted on here a few times some interesting nuggets on how hard it is to open up a new retail bank in the UK, so it'd be nice to see them allow some new companies in.

I seriously think that the Big Banks will simply shut up their High Street shops, and maintain a token internet service for retail customers. They will become like other mega-industries such as Ford, Tesco, British Gas, BT etc etc

That will probably be a good thing, but the rest of us will still be trying to recover from the cost of bailing them all out in 2008

TruckerT

purch

I guess it all depends on who owns each part.

If the same Holding Company owns the Retail Bank and the Investment Bank, then in the long run it won't make sod all difference to the overall safety of the system.

Cleaver

purch wrote: »

I guess it all depends on who owns each part.

If the same Holding Company owns the Retail Bank and the Investment Bank, then in the long run it won't make sod all difference to the overall safety of the system.

I don't understand why, but that's probably my ignorance.

If, for example, Barclays owned a retail bank and an investment bank in the UK and both were seperate surely they are two seperate entities? The retail bank would have to operate so that enough reasonable money was available to cover depositors and then the investment bank could do what it likes. Wouldn't that be better than the current scenario? Not trying to argue here, I just don't know that much about banking and it sounds logical to a lay person.

wotsthat

geneer wrote: »

I do hope that even our resident non-bulls can agree that this is very good news indeed.

Is there anything anywhere that isn't about bulls and bears?

pqrdef

If the EU doesn't veto this, I doubt if the investment arms will still be able to operate competitively in London. They will have to move or be sold off to foreign buyers, before they fail.

Thrugelmir

pqrdef wrote: »

If the EU doesn't veto this, I doubt if the investment arms will still be able to operate competitively in London. They will have to move or be sold off to foreign buyers, before they fail.

Banks such as UBS have already announced a reduction in their investment arm activities. The boom days for casino activities are over. As cheap capital to speculate with will no longer be available.

May well make London the place for banks to be based. As financial strength and credit rating is paramount to investors.