From The Guardian UK: http://www.guardian.co.uk/uk/2011/apr/10/banks-threaten-leave-london-prevent-bailout
Commission’s plans unlikely to include breaking up institutions, but banks ‘may still quit UK’
A government commission is to unveil measures aimed at ensuring taxpayers will never again need to bail out Britain’s banks, with recommendations that risk splitting the coalition and infuriating the banking sector.
Amid warnings from large banks such as Barclays, HSBC and Standard Chartered that they will leave London if the proposals by Sir John Vickers are too radical, the commission will seek to ringfence savers from riskier banking operations.
The commission has considered the potential impact of its proposals on the City and is expected to counter suggestions that they would encourage banks to move to New York or Hong Kong.
The report, thought to run to 200 pages, was handed to ministers late on Friday to be presented to the banks at 6am on Monday – an hour before its official release. It is expected to back away from proposals such as “narrow banks”, which only take savings, and splitting high street banks from their investment banking divisions, which Vince Cable, the business secretary, previously alluded to as “casinos”.
But it sets out a handful of ideas to avoid another taxpayer bailout and bolster competition on the high street in the wake of the rescue of HBOS by Lloyds, which was only permitted because Labour overrode competition concerns.
Crucially, Vickers and his four commissioners have looked at ways banks can bolster their capital through new types of loss-absorbing financial instruments. They are concerned that the capital held by banks before the crisis – largely equity – was too brittle and lacked the flexibility of other types of instruments that might be more effective incushioning the blow of multibillion-pound losses.
Continue reading at: http://www.guardian.co.uk/uk/2011/apr/10/banks-threaten-leave-london-prevent-bailout