You are here

Lukewarm reaction to Vickers report

19 September 2011

Financial services lawyers have given a lukewarm reception to the report by the Independent Commission on Banking despite Sir John Vickers’ effort – the peer leading the investigation – to present it as “far reaching”. A key criticism is the proposal’s failure to take account of the international dimension of the financial services market.

Angela Hayes, a partner in the financial services, regulatory and enforcement practice at Mayer Brown, said the report had, “at best”, provided a domestic solution.

“What’s really needed,” she said, “is better collaboration between regulators across jurisdictions and we are a long way off that at the moment.”

Jason Mansell, a barrister specialising in Financial Services Act work at 7 Bedford Row, said the recommendations would help politicians appease an electorate angry with banks but was “no revolution”.

Mansell said requiring the banks to shore up their reserves and separate their retail and investment arms posed too great a threat to economic recovery, but, more importantly: “In a globalised market like financial services the government cannot reform in a vacuum and in these uncertain times pragmatism is likely to prevail.”

But there were also other risks the report had not taken on board.

“Any radical reform of the banking sector carries with it a significant economic risk,” Mansell continued, before adding that “once the PR machine around the report has subsided, it will be business as usual.”

But the main recommendation – that banks should ring fence their retail business from their investment business – should be taken seriously, according to Michael McKee, head of financial services regulation at DLA Piper.

“The ring fence will focus on deposits of individuals and small businesses – but this is likely to catch a lot of private banking business too,” he said, “and it looks like it will be quite a hard ring fence – a retail bank will have to deal at arms length with other parts of the group and apply large exposure rules.”

Categorised in:

Financial services & Tax Children Expert witness