UK Companies Urge Government to Not Divide Banks

UK companies are urging government to not divide banks, as it would increase cost and prove inefficient.

UK companies are urging government to not divide banks, as it would increase cost and prove inefficient.

Banking reform has been on the policy hot seat ever since the beginning of the crisis.  Now, more than ever reform has to be handled correctly, which has led companies around the UK to suggest banks should not be broken into retail and investment divisions.  The belief is the banking process will be more costly and less efficient.  This so-called intervention will be done by the UK’s corporations or, the banks biggest customers.

One source at a large UK retailer commented in the Sunday Telegraph, saying: “We already have to deal with two or three big investment banks on a regular basis. If the banks weren’t integrated, it would simply waste time and make things even more complicated. It’s also likely that costs would go up. And all this for not particularly obvious – or at least proven – reason.”

He added: “There’s been so much concentration on politics and bonuses that the issue of the banks’ service to customers has been sidelined. There are a few big companies that want their considerations heard before too much structural change is enforced.”

The companies, as a consortium, will be consulting the Confederation of British Industry as they go through the campaign process.

Sir John Vickers is going to chair the commission and is assigned the responsibility of reporting on banking reform by the middle of 2011.

Richard Lambert, the director of the CBI confirmed the consultation will take place and the consortium would be canvassed over the next few months.

Lambert commented on the advantage of the membership, saying: “We are in an advantageous position because our members include banks and their customers, both big and small.”

Lambert added: “Banks are operating in a cloud of uncertainty at the moment. They don’t know the details of the future capital regime or liquidity regime, or the impact of the Vickers commission. The sooner they get some clarity on their future, the better it will be for everyone.”

Reform in general has been a hot topic of debate since the financial crisis began.

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