This page contains a Flash digital edition of a book.
BANKING


assets, which should contribute to primary loss-absorbing capital of 17 to 20 per cent. On 19 December 2011, Chancellor George


In the wake of the financial crisis, the UK Government


plans to reform British banks by separating retail and


investment arms. Liz Salecka weighs up the implications for the Channel Islands’ banking sector


I


N DECEMBER LAST year, the UK Government revealed the results of an Independent Banking Commission (ICB) inquiry, headed by Sir John Vickers, which was


tasked with finding ways of strengthening UK banks, curbing excessive risk-taking, and protecting UK taxpayers against having to shoulder future bank bailouts. The Vickers Report (as it has become


known) recommended wide-sweeping reforms of the UK’s banking sector – most notably that all British banks should ‘ringfence’ their retail banking businesses from their ‘more risky’ investment banking operations. This, it claimed, would rule out the possibility of a bank’s high-street retail business being dragged down by a failure or financial crisis within its investment banking arm, enabling it to continue serving the local economy as usual. The Commission also advocated that the


newly ringfenced retail banks be prohibited from offering their services to clients outside the European Economic Area (EEA), and that they should maintain equity-capital cushions equivalent to 10 per cent of risk-weighted


Osborne gave his firm stamp of approval to all of the ICB’s recommendations, paving the way for new UK banking legislation, which he described as likely to be “the most far-reaching reform of UK banking in modern history”. However, it has received mixed reactions in both the UK and the Channel Islands. While many view the recommendations


as an important step towards reducing the possibility and potential impact of a future financial crisis, others believe that they could


Many believe the recommendations could reduce both the competitiveness of British banks and their ability to support their customers


reduce the competitiveness of British banks and their ability to support their customers. It is estimated that the recommended changes could cost British banks between £4bn and £8bn to implement. According to the Jersey Bankers


Association (JBA), although the report’s recommendations still need considerable interpretation, “the overall desire to reduce the risk to UK customers and taxpayers from any future banking crisis is a good thing”. “Increasing the level of the capital ratios


within banks is one way to reduce the risk of the collapse of a bank, and this is very much in line with international thinking under Basel III [the new international banking reform,


February/March 2012 businesslife.co 17





Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112