Dont have an account?Sign up here
21 December 2012
Commenting on the report of the Parliamentary Commission on Banking Standards, Mark Stobbs, director of policy at the Law Society, said:
“The Commission has produced a very detailed and thoughtful report, with clear recommendations. The Commission does not question the Government’s key policy objective – to ringfence high street banking from investment banking – but as with the Law Society’s evidence to the Commission, it does question the Government’s approach to implementation. If the UK gets this wrong it could damage the competitiveness of UK banks and undermine the competitiveness of the UK as a place for international business and finance.
"The Commission is also right to be concerned about the skeletal nature of the bill. An overreliance on secondary legislation adds to business uncertainty. Without sight of the detail, which the secondary legislation will contain, it is impossible to predict the success or failure of the ringfence.
“Business value the use of basic derivates as a means of managing risk – e.g. currency exchange and interest rates. It is important that such derivatives should be allowed inside the ringfence, as endorsed by the Commission, though a detailed definition of ‘simple derivative’ is yet to emerge.
“The Law Society remains concerned that ‘front-running’ ahead of EU and other international proposals would give foreign banks that are not ring-fenced a competitive advantage. Whilst UK banks would work hard to implement the new UK-only rules, which would separate the retail and investment parts of banks, foreign banks could continue to play by the old rules. This would undermine one of the key aims of ringfencing, protecting UK taxpayers from risky banking.
"It is vital, however, that well-intentioned plans to strengthen the ringfence and implement bail-in plans do not pass unnecessary additional costs to businesses and other customers, through increased charges or higher borrowing rates. We risk creating a complex set of overlapping regulations, creating costs and uncertainty in an already challenging climate. When we need Britain’s banks to be lending to support growth, their best management brains will be adapting their business practices to the latest regulations.”