Retail banking arms of the universal banks are going to be asked to hold equity capital equivalent to 10% of their loans and investments to protect the tax payer form any future bankster folly. Apparently most banks are already holding near that amount. Adair Turner, Head of the FSA, has said the figure should be 15%. Swiss banks insist on 19%. Vickers should look at this again.
Vickers is not recommending that universal banks split their investment and retail banking operations, something Vince Cable was insisting on prior to taking the Tory shilling. Instead Vickers is suggesting a ‘firewall’ between the two. This is all a bit too hazy for my liking. Our money will still be allowed to whizz back and forth through this so called firewall. This is a fudge if ever there was one – dreamt up in a banksters’ backroom and surreptitiously ‘leaked’ to the committee members no doubt.
The other important issue is competition. Two banks handle 50% of the nation’s current accounts. This is nonsense. Vickers has suggested that Lloyds need to sell off 600 branches, but to whom, another universal bank? Until there are many, many more banks, we will continue to be stuffed by the banks. Vickers recommendation on competition needs to go much further on opening up the banking sector to new players.
Lastly, Vickers does not address the fact that our big ‘universal banks’ are far too big for an economy of our size. Even after the Vickers recommendations, universal banks will still remain a threat to our economic health, too big to fail and a threat to our democracy. In this respect the report lacks one essential ingredient..vision. Let’s hope Vickers is not too defensive about the criticism his report has received and that the final report in September is more forward thinking and… robust.