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Independent Commission On Banking Report Released

by Jim ONeil on April 14, 2011

in uk banks

On Monday, the Independent Commission on Banking released a report questioning whether making basic rules more restrictive can lessen the tendency for modern banks to take risks. Panel head Sir John Vickers, an Oxford economist and his panel want to make it less tempting for banks to engage in risky behavior.

They also want to improve the ability of banks to absorb this risk and make it easier to clean up any messes.

This report emphasizes crisis prevention, a move that is somewhat after the fact, considering the financial meltdown already occurred. However, taking action now can prevent another one from developing. A future crisis could be much worse based on the existing level of public debt that would make it impossible to rescue some banks.

Several moderate measures are proposed by the commission. These are designed to prevent banks from being too reckless while allowing them to remain competitive. One recommendation worthy of note is to force financiers to split their casino and daily operations into separate divisions.

This resembles the division into different companies that the U.S. imposed during the Great Depression. However, the commission notes that any boundaries between investment and retail activities would be difficult to police.

The meatiest recommendations involve imposing higher capital requirements without exceeding international standards. Whatever happens, the past crisis revealed that taxpayers have the obligation to

rescue any errant behavior.

In general, the measures proposed are not large-scale and do not answer the tougher questions.

No mention was made of how the state could use a bank that it acquired unexpectedly for the good of all. The only other significant recommendation worth mentioning is that the power of the banking and insurance company HBOS be curbed on the high street.

For now, it seems, people will continue to take out loans, debt will accumulate, and we will keep our fingers crossed.

salarione erla

If "liberals" were in charge, we may actually have peace, wealth, a stable budget, world respect, and a rational foreign policy, kind of like we did the last time they were in control.

Duh!

thinkmoney

UK banks must have ‘living wills’ by 2012

Jeremy R

Wait, I thought that families raised children, not the government. Make up your mind! And the French? Nothing THEY say makes sense, right?! So why are you quoting them?

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