Cable: end universal banking

VINCE Cable, the business secretary, will today call on the Independent Commission on Banking (ICB) to sound the death-knell for universal banking by backing a form of ring-fencing that is just as tough as a full-scale break up of Britain’s banks.

His intervention will put pressure on the ICB to explain why it has decided to recommend a ring-fence, where a bank insulates its retail operations from activities like investment banking, instead of forcing banks such as Barclays to spin off and sell their retail businesses.

Cable will set out a series of “key tests” for the ring-fence, including: “Will the division between what is inside and outside the ring-fence ensure that nothing resembling a universal bank remains?”

The comments are sure to provoke alarm in the banking industry, which fears any ring-fence could be designed in such a way that it is essentially as debilitating as the now-defunct Glass-Steagall Act, which stipulated that investment and retail banks could not be owned by the same company.

Cable will also make it clear that he disagrees with the chancellor, who used his Mansion House speech last month to back a form of ring-fencing. “As you will know, my own instincts lie with full separation,” Cable will say.

And the business secretary will accuse banks of having an “ingrained ‘rip-off’ culture” that extracts “excess profits from personal and business customers”, which must be tackled through greater competition.