22 January 2011 Last updated at 12:28Banking inquiry 'considering' break-up of industry
Some banks have threatened to move abroad if they are broken up
The head of the commission reviewing whether the UK's biggest banks should be broken up is expected to say later that wide-ranging reform is needed.
In a speech in London, Sir John Vickers is set to confirm he is considering plans to separate banks' trading and retail operations.
These may require banks to put their investment arms into separate entities that could be allowed to collapse.
The BBC's Joe Lynam said "keeping the status quo is not an option".
Our correspondent added: "The public simply wouldn't wear things staying the same as they are forced to endure swingeing spending cuts and some tax rises as a direct result of reckless banking behaviour before the financial crisis of 2007/08."
In his speech, Sir John will stress that no final decisions have yet been made.
Bail-outSir John, a former chief economist at the Bank of England, is the chairman of the five-person Independent Commission on Banking (ICB) set up by the coalition government.
It is looking at financial stability and competition, including the question of what should be done about banks deemed "too big to fail".
One suggestion is that investment banks should be separated from retail banks, so that depositors' money is not put at risk by the investment banking arms of the business.
Equally, if banks were allowed to collapse if mismanaged, taxpayers would not need to come to the rescue.
Continue reading the main storyAnalysis
Joe Lynam BBC News
The ICB says it is not ruling anything out from its final conclusions.
That's not quite true.
Keeping the status quo is not an option for the commission. The government and the banking fraternity have all but accepted that.
The public simply wouldn't wear things staying the same as they are forced to endure swingeing spending cuts and some tax rises as a direct result of reckless banking behaviour before the financial crisis of 2007/08.
So this latest update from Sir John Vickers may prove to be the starting gun for a lobbying and PR onslaught from Britain's largest banks as they hope to limit the final recommendations by the ICB.
One option (short of breaking up the banks) is some sort of ring-fencing of banking activities - a process known as subsidiarisation.
This approach would mean the investment banking parts are financially, but not legally, separated from the more mundane retail parts.
This is what happened when the last Labour government bailed out both Royal Bank of Scotland and Lloyds Banking Group when it deemed the risks to the wider financial system of allowing them to collapse were too great.
The commission is also looking at whether too few big banks have too much control over the retail banking sector in the UK.
Currently, the top six British banks control about 90% of all deposits. This compares with a 68% market share for Germany's top seven banks and just 35% for America's top eight.
Leaving homeOther topics for scrutiny include whether banks should be restricted in the amount of their own money they can use for investment trading.
Critics have said that splitting up banks could damage the UK's competitive edge and make banks leave the country.
HSBC and Standard Chartered have questioned whether they would keep their headquarters in the UK should the the commission recommended a break-up.
The other members of the ICB are former Ofgas director-general Clare Spottiswoode, ex-Barclays chief executive Martin Taylor, former JP Morgan co-chief executive Bill Winters, and Financial Times chief economics commentator Martin Wolf.
The ICB has until September 2011 to make its recommendations to the government.
Saturday 22 January 2011
BBC News - Banking inquiry 'considering' break-up of industry
via bbc.co.uk
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