Bank bosses: ‘Vickers is done deal’

BRITAIN’s top bankers yesterday admitted that the industry overhaul proposed by the Independent Commission on Banking (ICB) is a “done deal” and have ditched opposition to it.

Bank chiefs representing Royal Bank of Scotland, Barclays and Lloyds told a House of Lords committee that they now accepted the ringfencing of retail operations from investment banking, which was the cornerstone of the ICB’s proposals.

Bob Diamond, chief executive of Barclays, and his counterpart at RBS, Stephen Hester, said ringfencing was never their first option for making the financial system safer after the nationalisation of Northern Rock and multi‑billion pound taxpayer bail-outs of RBS and Lloyds.

Diamond told the House of Lords economic affairs committee that it was “simplistic” to brand the commission’s recently released report as good or bad.

But he added: “It’s time we moved on and begin implementation because there’s a lot of positives in the report as well.”

The Barclays boss said the industry “can live with” the split of high street banking from supposed riskier “casino” banking, and that the flexibility of the ICB proposals, including delaying implementation until 2019, was positive.

Hester said: “We regard this as a done deal. Our assumption is this is happening, for right or wrong, by overwhelming support of the electorate.”

He said that the British banking industry would “make the best of it” as far as the overhaul was concerned.

ICB chairman Sir John Vickers and his colleagues have put the cost of fire walls between retail and investment banking at between £4 billion and £7bn. However, the bankers told representatives of Britain’s upper political chamber that it was too early to cost the exercise.

Sir Win Bischoff, chairman of Lloyds, the bank laid low after the controversial acquisition of HBOS in early 2009, said of operational fire walls: “It’s not a make‑or‑break issue. But there are additional costs that are uncertain and the [future] competitiveness of the City of London as a financial market is unknown.”

Bischoff added that the changes would hurt the City short-term but might be positive longer-term as international banks liked safe banking environments.

The banking witnesses, who also included Douglas Flint, the Scots‑born chairman of HSBC, and Ana Botin, chief executive of Santander UK, said despite the ICB’s cost estimate of the changes it was too early to be definitive.

Diamond commented that £4bn to £7bn “is not a small amount of money. It’s a large amount of money. If you can be safe and sound without that cost that would be better”.

However, economic affairs committee chairman Lord MacGregor hit back, arguing that the cost had to be “set in context” of banking balance sheets worth trillions of pounds.

Hester acknowledged that the costs passed on to banking customers of the overhaul proposed by Vickers was likely to be “modest”.

Yesterday’s meeting came after Vickers and his colleagues appeared before the House of Commons Treasury select committee on Monday, claiming that their proposals would make the financial system safer, without leading to an exodus of banks from the UK or a loss of competitiveness in the City of London.

The banking commission chairman is due to defend its proposals to the economic affairs committee next Tuesday.