CBI calls for probe into the cost of ring-fencing proposal

BRITAIN’S biggest business lobby has demanded an investigation into how much proposals to ring-fence the retail operations of UK-based banks will cost the economy.

The CBI called on the Independent Commission on Banking (ICB) to carry out a “rigorous cost-benefit analysis” of the plans, adding it remained “unconvinced” the policy will support recovery.

John Cridland, director-general of the CBI, said: “The ICB should not proceed with the idea unless it stands up to a rigorous cost-benefit analysis.”

The presence of a ring-fence around retail banks, which would have an implicit state guarantee in the event of another financial crisis, could lead to riskier lending, Cridland argued.

A “one-size-fits-all solution” would also force banks to have exactly the same business model, reducing competition, increasing costs for businesses and hampering growth, he added.

The main banking lobby group echoed the CBI’s call for the ICB to examine the effect of its plans on growth before making its final recommendations.

“The ICB must do the analysis of the impact on the economy of their options... and that analysis must be made public,” said British Bankers’ Association chief executive Angela Knight.