Banks: little stability gain from Vickers too big to fail

THE VICKERS Commission was completely unnecessary in solving the “too big to fail” problem, RBS chief Stephen Hester told a committee of Lords yesterday.

“I believe that goal would have been accomplished without Vickers due to the international reforms that are in place,” Hester said. Barclays’ Bob Diamond agreed: “It’s not a question of with Vickers or without. It’s how banks should operate.”

However, Hester added that he regards the ring-fence requirement as “a done deal”, with the focus now on the details of how it will work.

He was appearing alongside rival chief executives in a House of Lords hearing on the Vickers Commission.

But despite bank chiefs seeing little financial stability benefit from the proposals, HSBC chairman Douglas Flint said that they have prompted difficult questions from shareholders for HSBC over the cost of being domiciled in the UK.

“It poses a structural and cost issue for banks’ headquarters, as opposed to the business actually done in their UK banking operations,” he said.

HSBC is understood to be particularly concerned about the commission’s requirement that banks’ capital bases include unsecured bonds equivalent to seven to ten per cent of their global assets. The measure could cost HSBC billions because its global balance sheet is far bigger than its rivals’, with a fraction of those assets held in the UK.

“It will certainly have an impact as to the relative benefits or dis-benefits of a group structure,” said Flint.

Santander UK chief Ana Botín also voiced concern over the commission’s capital requirements, saying that anything much over international standards to keep a 9-10 per cent capital base “we feel is not necessary and is not going to add much to our stability”.