12th Apr 2011 - The Vickers Report - Good or Bad...
Much to our relief The Vickers Report was not as damning as we all believed it might be. However in many respects it is flawed and it fails on a number of levels.
The recommendations, though not necessarily ground-breaking, do however highlight a few key areas that need to be tackled:
Competition: well breaking up the Lloyds Branch Network to create more competition on the high street all seems very good, but the reality is that with extra regulation and more stringent liquidity requirements, which banks will have an appetite to fill the gap created? The costs associated with setting up have just increased dramatically. Also the increase to 10% will be passed down to us the consumer, creating a counter productive outcome whereby the consumer, who this was meant to protect, will end up paying even more to borrow money. Using a sledge hammer to crack an egg is not the best solution. Setting further caps on charging would have been the way forward.
‘Ring fencing’ Retail Banks to protect them from the riskier trades associated with Investment Banking also comes with a cost. The burden of additional regulation can only serve to stifle Banking activity further. We were saved from the suggestion of making a clean divorce between the two but to what extent will the former be ring fenced. Depending on how far that is taken it may even lead to a breakup in all but the statutory sense.
There are a few areas that I agree with such as making it easier to move an account between different banks and all in all we can breathe a sigh of relief, but at this stage we have to remember that this is still only a report on recommendations.
This is a world of many opinions. Please feel welcome to leave yours by contacting David Archer
