Bank ring-fencing threatens UK economy

| August 23, 2011
Bank ring-fencing threatens UK economy

Britain’s banks are warning that ring-fencing their retail activities, to protect against investment banking losses, could endanger the UK economy because of the cost involved.

A ring-fencing proposal will form part of the Independent Commission on Banking’s (ICB’s) final report, due out in September.

However, according to the British Bankers’ Association (BBA), the proposed reform has not been costed and a “chorus” of concerned bankers and business people is now warning of the dangers of increasing the cost of banking at a time when the economic recovery is, at best, frail.

Ring-fencing has already been described as a “leap in the dark” by the Treasury Select Committee and last month, the Confederation of British Industry (CBI) warned that it could be problematic for businesses that need the integrated services provided by banks in their current form.

Firms surveyed by the CBI were also concerned that ring-fencing may reduce competition by forcing banks to adopt the same business model.

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  1. Ellen says:

    Savers are using banks only as a place to put their money and interest rates are not even going half way to keeping pace with inflation. Their savings should not be used to prop up the banks commercial arm. If the banks are having problems keeping the two apart maybe the return of the credit union for the banking needs of most of the population is more preferable and the banks can run their business like a casino without using the savings of the general population to do so.