The responses to the ICB’s interim report, published yesterday, show that even some banks that would be little-affected have serious misgivings about its main proposal to hive off all retail activities into a separate subsidiary, a reform endorsed by George Osborne.
A damning response from HSBC’s Douglas Flint says the ICB will, at best, make an “incremental” contribution to financial stability, while JP Morgan calls the ring-fence “largely unnecessary” and highly expensive.
Barclays said that it would be more “cost-effective” to hive off a bank’s infrastructure than its retail activities: “The ring-fence adds only marginal benefit,” it said in its submission, adding that it amounts to an “explicit” state guarantee for retail banks that will lead to “an increased cost of lending and reduced economic activity”.
RBS claims that the policy will exacerbate systemic risk because it will “cement and make more explicit the perception of implicit support” for retail banks. “Like it or not, this is how ring-fencing will be perceived,” it says.