Vickers Report: Banking Reform Should Help Economy

Sir John Vickers

Sir John Vickers

The banking sector has been under increasing pressure lately, many working in the sector have been blamed for the current economic condition across the UK. Changes to banking practices is a change that many have been calling for, not only because of the big bonus culture that many employees enjoy but because of the faults that have led to the current crash.

During the good times many banks did not hold enough capital, but the concern is now that these financial institutions will feel the need to keep too much in capital in their possession during these darker days.

Sir John Vickers

George Osborne, the Chancellor of the Exchequer, is all for the report which will be coming out on Monday and the reforms that it will instigate.

The banking reforms which are to be set out by Sir John Vickers in his report will be a part of the Independent Commission on Banking, and will mean that the everyday banking practices of ordinary individuals and smaller businesses in the UK such as deposits and overdrafts will be managed by a ring-fenced part of a bank which will have no authority to operate investment activities.

As would be expected, the banking industry has been lobbying the Coalition Government in an attempt to reduce the number of changes that will be required. They are arguing the cost that the banking industry will incur will be passed on to customers, but this is unlikely to change the minds of those who will be enforcing the changes.

The cost of the changes is likely to be about £5 billion, but the Chancellor has revealed that the cost will be balanced by the benefits to the UK economy of escaping a financial crisis at some point in the future.

It will only become apparent on Monday whether or not the government will dampen down the industry when it officially responds to the report. It is not expected that the report will reveal any surprises, but interest will centre around whether or not government ministers will approve the recommendations.

Portable bank account numbers

What is quite clear is the reason regulators have pushed for tougher rules, during the good years many banks were stretched to the max and when those days turned bad something had to give and this led to the financial crisis.

Consumer group Which? are in firm belief that the banking reforms have not gone far enough so that there is more competition in banking in the UK. What they have suggested is that portable bank account numbers should be rolled out which would mean consumers would be able to switch to better deals in a much more simpler way.

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