RING-FENCING retail banking operations to separate them from investment banking are the best way to reform the sector and will in fact increase London’s competitiveness in the long run, the author of the plans insisted yesterday.
Sir John Vickers even argued that MPs’ and peers’ proposals to electrify the ring fence with the threat of full separation against banks who tried to undermine the system were barely needed, as his system is so strong already.
Vickers attacked the idea of combining his plans with a US-style ban on proprietary trading under the Volcker rule.
“The risk if one added a Volcker rule is that a large portion of regulatory energy would be forced to be directed to those issues, when regulatory capacity is finite,” he told the Parliamentary Commission on Banking Standards.
And even though the new rules are likely to be disruptive and costly, he insisted London will become more, not less, competitive.
“In the long run, competitiveness is going to be favoured by safer, sounder, more stable banking,” Vickers said.