HSBC hopes for Vickers relief

THE TREASURY will kick off a consultation on the Vickers Commission banking reforms today that could deliver a major lobbying victory for HSBC after its tough talking on capital rules.

Chancellor George Osborne will today unveil an 85-page document laying out the Treasury’s current thinking on each part of Vickers.

But as City A.M. reported last month, Vickers’ proposals for a beefed up set of capital rules are likely to have to wait in order to fit in with a European timetable and could be limited only to the ring-fenced UK part of a bank.

Any signal of a watering down would be a major victory for HSBC and Standard Chartered, the two banks that have led the lobbying against the suggestion that they should have to raise billions in new unsecured debt that can absorb losses if they go bust.

Osborne will indicate the current direction of travel today but the final outcome will not be known for months.

HSBC has consistently been critical of the capital proposals, saying they penalise safer banks. The bank has also spoken to Hong Kong regulators about moving its headquarters abroad.

And as City A.M. revealed recently, banks submitted a confidential lobbying paper warning that front-running the Vickers capital proposals in the UK before they are implemented in the EU could trigger a credit crunch in Britain worse than the one already underway on the continent.

The paper said: “Adopting a regime which is at odds to that which prevails internationally would have serious consequences for UK banks’ ability to attract funding and therefore the UK economy more broadly.”

HSBC would be particularly badly hit if the Vickers Commission’s proposal on extra capital were to apply to its global operations because of the vast size of its non-UK balance sheet.

In his statement today, Osborne will also confirm his intention to legislate for some kind of firewall between retail and wholesale banks, but is likely to leave the details to regulators after a consultation.

That could mean that banks work out the details individually with their supervisors.

Osborne is also set to confirm the timeline: after the consultation, the Treasury will produce a white paper by 2015 with banks given until 2019 to implement the changes.

Business secretary Vince Cable claimed yesterday that the coalition will implement Vickers “in full” – but since many of the details have yet to be thrashed out, it is yet not clear what that means in practice.