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Following on from my blog post in early April about the Vickers Report, it would appear that the Chancellor has accepted the major finding of the report that large banks must ringfence their retail operations to make them independent of any investment banking divisions. Increasing the tier 1 capital ratios from the current 7% to a forecast of 10% will also be imposed – thus providing a Government answer to the ever present question of “too big to fail” that has been debated to death since 2008.
I thought it was interesting that George Osborne has come out in public support of it now, rather than wait until the publication of the final report in September. This will send a clear signal to the banks involved, mainly RBS, Barclays and HSBC that the time for lobbying is over and to start making plans to comply with the new rules. Ed Balls has also come out and supported the findings; given the cross party approval I would suggest that at this point any arguing against the Vickers Report is now futile.
What will this mean for interim management? Certainly a lot more change to deliver which as ever remains the engine room of the market. Ringfencing will require that retail operations will need to be able to stand on their own two feet – with their own IT systems, finance and risk functions etc. Considering the size of the organisations in scope it could boost demand for interim managers in the sector for several years.
All these changes and increases in capital to improve market security will have to be paid for somehow and no doubt the banks will be looking to pass some of this cost on to customers – for everything there is a price!
Andrew McIntee is a Director and Head of Financial Services
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June 20th, 2011 at 3:04 pm
It sounds obvious and sensible as a strategy.My concern is that the “fences” the banks put up between their own divisions won’t be strong enough and the same thing will happen again( perhaps to a lesser extent).There needs to be regular monitoring in place ,otherwise human nature will prevail and corners will be cut by the banks to save costs in the short-term.