Vickers not convinced by bank lobbying

THE Independent Commission on Banking (ICB) has dismissed an industry estimate that breaking up wholesale and retail business activities would cost the UK’s main banks £12bn-£15bn, City A.M. has learned.

A report produced by Oliver Wyman as part of a bank lobbying effort and submitted to the ICB as evidence has said that the cost of implementing a subsidiarisation model – whereby banks must capitalise their retail and wholesale operations separately – would cost the UK’s five major banks a total of £12bn-£15bn.

But the ICB thinks the figure “isn’t reasonable”, said an insider, and that it contradicts other more reliable cost estimates submitted as evidence.

The Commission is due to publish an interim report revealing its thoughts so far on 11 April. The interim report will be the first window into its thinking since a speech by Sir John Vickers in January, which showed that the ICB had moved away from breaking up ownership of banks but is mulling the costs and benefits of a subsidiarisation model.

The news that Vickers’ Commission has shrugged off the Oliver Wyman report will disappoint banking chiefs, who have been keen to emphasise that rising costs of capital from regulations are likely to be passed on to consumers. Oliver Wyman also produced evidence for Lloyds’ submission on the competitiveness of the high street banking industry.

The ICB declined to comment.