Vickers: ICB plans will cut state subsidy

BANKS will see their implicit subsidy from the state significantly cut down if the government implements recommendations from the Independent Commission on Banking (ICB), its chair John Vickers (pictured) said yesterday.

“Our measures would have a major effect on reducing the subsidy,” Vickers said when speaking before the Treasury Select Committee yesterday. His views appeared to be well-supported by Moody’s decision to launch a review into the credit ratings of the UK’s major banks (see left).

But Vickers added that it is impossible to solve the “too big to fail” problem entirely: “Total abolition is unlikely. There are always going to be circumstances when the government will feel committed to come to the rescue of banks.”

Later, at the ICB’s first public hearing on its interim report, released last month, Vickers said that while remuneration is not directly within the commission’s remit, “some of the issues we’re focusing on could well bear on that kind of issue (bonuses)”.

He added that the report sought to protect “ordinary, core banking”, but did not detail what that includes.

He also told members of the public gathered to discuss banking: “If banks do ... get into trouble it’s got to be much easier to sort them out.”

The ICB is consulting on proposals in its interim report, which recommended a “ringfence” around the retail operations of major lenders to insulate them from global financial instability.