Reform ‘could hamper UK banks in global markets’

By TERRY MURDEN
Published on 15/06/2012 09:26

CHANCELLOR George Osborne’s pledge to reform Britain’s banks drew a warning last night that it could make them internationally uncompetitive.

The UK government is to adopt most of the recommendations proposed by the Independent Commission on Banking (ICB), including plans to ringfence deposit-taking from investment banking.

But Kevin Burrowes, UK financial services leader at accountancy giant PwC, said: “The government and regulators have a big challenge to get a clear, concise and workable set of laws and guidance in place.

“The banks face the massive task of implementing, conforming and complying. This comes on top of a huge amount of other regulatory changes already being imposed on the banks such as Basel III, the Retail Distribution Review and MiFiD.

“We all want a stable, highly-competitive, customer-focused UK banking sector. The very heavy burden of all this regulation and the management effort required to address it could potentially make our banks uncompetitive globally.

“The rapidly growing financial institutions from emerging markets will seek to exploit the opportunities this gives them.”

Kevin Mountford, head of banking at price comparison website MoneySupermarket.com, said that retail banking customers could end up footing the bill as banks will be expected to hold more capital as protection against losses.

The lenders would also be unable to use their more-profitable investment banking arms to keep costs down, he said.

However, other business groups welcomed the changes. Andy Willox, the Federation of Small Businesses’ Scottish policy convener, said: “It makes sense to ringfence the banks’ retail functions in a bid to ensure that services vital to small businesses are never put at risk again.”