Friday, 4th January 2013
UK: Parliamentary Commission on Banking Standards First Report
Source: Parliamentary Commission on Banking Standards (UK)
Investigations into LIBOR have exposed a culture of culpable greed far removed from the interests of bank customers, corroding trust in the whole financial sector. The separation of deposit-taking from certain investment banking activities can offer benefits not just for financial stability, but also in helping to address the damage done to standards and culture in banking. The Government has proposed a ring-fence to achieve separation, but any ring- fence risks being tested and eroded over time. Pressure will come from many quarters. Any new framework will need to be sufficiently robust and durable to withstand the pressures of a future banking cycle. The precautionary approach of regulators will come under pressure from bank lobbying, possibly supported by politicians. Additional steps are essential to provide adequate incentives for the banks to comply not just with the rules of the ring-fence, but also with their spirit. In the absence of the Commission’s legislative proposals to ‘electrify’ the ring-fence, the risk that the ring-fence will eventually fail will be much higher.
The Commission recommends that the ring-fence should be electrified – that banks be given a disincentive to test the limits of the ring-fence. This should take the form of two measures, set out in statute from the start, which could lead to full separation. First, if the regulator has concluded that the conduct of a banking group is such as to create a significant risk that the objectives of the ring-fence would not be met in respect of a particular bank, it should have the power (subject to a Treasury override) to require a banking group to implement full separation. Second, there should be a periodic, independent review of the effectiveness of the ring-fence across all banks, with the first such review to take place four years after implementation.
+ Volume I (PDF; 701 KB)
+ Volume II (PDF; 1.3 MB)
By Adrian Janes
Having begun his career in academic libraries, Adrian Janes has subsequently worked extensively in public libraries, chiefly in enquiry work as an Information Services librarian. In this role he has had particular responsibility for information from both the UK Government and the European Union. He wrote a detailed report on sources for the latter which was published by FreePint in 2007, and has contributed articles to FreePint and ResourceShelf. He is involved in training in information literacy and the use of online reference resources.
A Contributing Editor to DocuTicker, he also write reviews for Pennyblackmusic.
Adrian can be reached at firstname.lastname@example.org
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