Full Glass-Steagall back on ICB agenda

FULL separation of retail and investment banks is back on the agenda for the Independent Commission on Banking (ICB), City A.M. understands.

In response to an avalanche of responses to its interim report urging the ICB to reconsider a full Glass-Steagall-style separation of banking operations, the commission is considering whether it should go further than a ring-fence around retail banking and instead opt for separating the ownership of retail and wholesale operations.

However, given the likelihood of strong opposition from the Treasury, which recently endorsed the ring-fence idea, the ICB’s move to broaden out its options just six weeks before its final report is due could plunge UK banking policy into confusion.

The commission had previously all but ruled out full separation of retail and investment banking, instead favouring the subsidiarisation of retail activities to protect what it views as “essential” operations.

But City A.M. understands that as part of its work to determine the boundaries of the firewall around retail banking, it is also reconsidering whether it should recommend a separated ownership structure at the top.

The commission’s rethink will please the Treasury Select Committee (TSC), which said yesterday that “full structural separation has not received sufficient analysis”.

But the news will come as an annoyance to senior banking executives, who had thought that all the ICB’s major policy thinking would be done by the end of the month.

But instead of concentrating only upon the practical details of its ring-fence proposal, the commission is maintaining a broad focus at a late stage in its thinking.