A British commission's report on how to make UK banks safer and more competitive has been given to senior government officials ahead of its official release on Monday, which analysts expect will propose "ring-fencing" retail banks from investment banks. The Independent Commission on Banking (ICB) is due to publish its interim report on April 11 but an embargoed copy was handed out on Friday, sources close to the commission told Reuters.
"A very small number of senior people in the Treasury and Department of Business has received copies," said one source. Analysts polled by Reuters expect the commission to recommend that UK banks form separate subsidiaries for their retail banking and investment banking operations, to "ring-fence" and protect savers if the investment bank fails.
While this proposal would not be as drastic as recommending that groups split their retail and investment banks into two separate companies, analysts say it could put onerous new capital requirements on the top UK lenders. The "Big Four" UK banks - Lloyds Banking Group, Barclays, HSBC and Royal Bank of Scotland - have all resisted calls for a radical shake-up of their business.
The ICB's findings could also affect Spanish bank Santander and Standard Chartered, which is headquartered in London despite making most of its money overseas. And several banks have made veiled threats to move their headquarters away from London if British banking regulation becomes too much of a burden. Under the expected subsidiarisation model, banks have to allocate capital to different units or country operations, as Santander does with its British arm. The units are legally ring-fenced but remain under the parent's ownership.
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