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Independent Commission on Banking recommends radical changes to UK banking
The UK Government’s Independent Commission on Banking produced its final report today, making recommendations to promote stability and competition in banking. The aim of its recommendations is to create a more stable and competitive basis for UK banking in the longer term. On promoting stability, it recommended reforms that will ring-fence retail and business banking from investment banking and a range of measures to increase the loss-absorbency of banks. The aim of these measures is to enhance the resilience of the UK’s financial system.
To promote competition, the ICB recommended a new personal current account (PCA) redirection service to make switching banks easier for customers, improvements to transparency and giving the new Financial Conduct Authority a primary duty to promote competition. It has stepped back from its proposal in its interim report asking Lloyds Banking Group (Lloyds) to sell more branches and reduce its share of the PCA market, and has also decided that an immediate reference for an in-depth market inquiry by the UK’s Competition Commission is not needed.
Instead, it has asked Lloyds to ensure the entity that results from its planned divestment will be well funded and capable of growing its share of the PCA market to at least 6%. Lloyds had already committed to a divestment of a banking business that will have at least a 4.6% share of the UK’s PCA market as one of the conditions of its receipt of state aid during the financial crisis. If the ICB’s recommendations are not achieved by 2015, it proposes that the market is then referred to the Competition Commission.
Frontier (Europe) advised Lloyds throughout the ICB process.
For more information, please contact Paul Cullum at p.cullum@frontier-economics.com or call +44 (0) 20 7031 7000. Druckansicht
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