The House of Lords Economic Affairs Committee today publishes a short report on the Independent Commission on Banking (ICB) report, which was published in September. The Committee heard evidence from Chairmen and Chief Executives of the major clearing banks and from Sir John Vickers, the Chairman of the ICB, in order to assess the significance of the report to the banking sector and the banks reactions.
The aim of the banking stability reform programme put forward by the ICB is to put the banking system on a sounder basis to avoid the risk that the taxpayer would again have to bail out banks in any future crisis. Its main elements are ring fencing of British retail banks and the adoption of more stringent capital and leverage ratios.
Following hearings it was clear that the banks did not share the ICB estimate of the cost of its reform package. And the Committee had concerns if there were enough suitably qualified candidates to provide the majority of board members of ring-fenced banks as recommended by the ICB. The Chairman wrote to the banks and to the Chairman of the FSA respectively, asking for more information and views on these two points. Their replies are published for the first time today as part of the report.
The banks broadly accept the ICB recommendations for a financial stability reform package as a ‘done deal’. But they expect to be consulted as they are implemented. Most banks believe that the ICB has underestimated the cost of the reform package and doubt its effectiveness.
Commenting on the report, Lord MacGregor, Chairman of the Economic Affairs Committee, said:
"Given the importance of reform of banking regulation to the wider economy, we thought it right to hear banks’ and the ICB’s views. While implementation of some reforms is to be aligned with international reforms due in 2019, ring-fencing could well come in sooner. It is Parliament which will be responsible for the timing and content of measures to implement reform. The important thing is to ensure that taxpayers will not have to bail out the banks again.
"It is welcome that during our inquiry the banks’ accepted the ICB’s recommended financial stability reform package as a done deal."