April 11, 2011

Commission recommends ring-fencing retail banking

by Jan Harris

The Independent Commission on Banking (ICB) has published in interim report recommending that UK banks’ retail business should be ‘ring-fenced’ from their investment banking operations.

It suggests that the retail operations should hold their own capital reserves, at higher levels than currently, to protect against potential losses.

The suggestion falls short of a complete break-up of investment and retail banking operations, which may have led to some banks moving abroad.

The interim report also recommends that Lloyds Banking Group should sell more of its branches to increase competition on the high street.

The ICB, which was set up to review UK banks after last year’s credit crunch, will publish its final report in September, although the
government is not legally required to implement its recommendations.

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