A year from now the Independent Banking Commission (IBC) will publish its findings. Although nobody is foolish enough to pretend to know what they will find. The banks are not taking any chances. On one extreme, it might be an end to "universal banks". They are trying to preempt any such talk with their threat of moving shop out of the UK.
The commission will not only look at the question of banks being "to big to fail" (my opinion "to big too frail") they will also look at whether retail and investment banking be separated? evaluate the competition of banks activities and their respective market share, judge whether the banking industry is competitive, what the implications of the merger of LLoyds and HBOS brought about, amongst others. The commission will also have to tread a fine line because the government is also a shareholder now. The Govt might lose out if the commission recommend added measures for those banks, which received bailouts, to reduce operations in interest of competition. Measures which might include forcing those banks bailed out to further reduce their market share on top of what Europe has asked them to do. These are all headline grabbing topics and without a doubt this commission is one much needed, not only to to review and understand the best way forward for the banking system in this country but to kick start a banking reform debate.
However, the Banks might not have much to fear, Sir john Vickers will not be introducing any ground breaking recommendations. He certainly, in my opinion, will not be advocating the breakup of retail and investment banking. What he might have a good look at, and which is the more important, is the systematic risks associated with the banking system today. if there is anything that could be done to reduce this risk in order to make the industry more efficient. What we should expect is a finding of a better regulation mechanism not necessarily more regulation. Apart from Sir Johns published volumes on competition and globalization, how do i arrive at such conclusion when they have not started investigations yet? Well lets look at who is a part of this team. We have Clare Spottiswoode (ofgas) and the respected Martin Wolf of the FT. Here the independence endeth. Next we have Bill Winters, who was co-chair of JP Morgan and former Barclays chief-executive Martin Taylor. Mr Taylor was the CEO who was responsible for selling of the equity arm of then BNZ and creating BARCAP, with Bob Diamond leading it. In fact Mr Taylor wanted very much to merge with Natwest during his time as CEO but was rebutted by Natwest. So, I hear you ask will the man who put the ball in motion to create Barclays Capital and who actively looked to increase the size of his bank "during power" advocate against his own strategy? I think not.
Not taking anything away anything from Martin Wolf who is a well respected economist, but its a shame the commission does not include more like him. If it did, then we might have a serious review. Therefore the banks (who were not the ones to blame but the regulators) can keep calm and carry on. However, they did know this before i did... so why all the fuss...
http://news.bbc.co.uk/1/hi/business/223274.stm
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