British banking inquiry to focus on break-up issue

The issue of whether to break up Britain’s banks will be top of the agenda tomorrow when more details emerge of a Government-led inquiry.

The Independent Commission on Banking (IBC) is expected to confirm the key areas under review as part of a year-long investigation that will look into the splitting of retail and investment banking operations.

The IBC, which is chaired by Sir John Vickers, former chairman of the Office of Fair Trading, was set up in June to look at financial stability and competition.

While the issue of whether to separate banks will be at the forefront, it is also expected to consider competition within the high street sector, which could lead to calls for big players such as Lloyds Banking Group to shrink.

The IBC probe, which completes next September, has already sent shockwaves throughout the industry.

Banking giant HSBC recently warned it would consider moving its headquarters from the UK if the commission recommended a break-up.

Stuart Gulliver, who runs HSBC’s global banking business, reportedly told a conference there “could be significant implications for where we may choose to headquarter our institution” should the commission call for a split.

Such a move would also impact on other major players such as Barclays and Standard Chartered. Standard Chartered has also recently raised a question mark over the future of its UK headquarters.

It is expected that chief executives of all of Britain’s largest banks will face interrogations by the IBC panel, which is also made up of Clare Spottiswoode, the former director-general of Ofgas, Martin Taylor, a former chief executive of Barclays, Bill Winters, the former co-chief executive of JP Morgan, and Martin Wolf, the chief economics commentator at the Financial Times.

But the commission will need to pull off a difficult balancing act amid the warnings of an exodus of UK banks.

If Britain acts unilaterally from other countries in splitting investment and retail operations, it could lose its competitive advantage.

Business Secretary Vince Cable has been vocal in his calls for “casino” banks to be hived off from retail deposits.

But the recent appointment of HSBC chairman Stephen Green as trade minister may offer the industry a friendly ear within government.

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