Banks may save £10bn under proposals

BANKS may save about £10 billion (€11.38bn) in capital and other costs under proposals being considered by the Britain’s Independent Commission on Banking aimed at securing the financia lsystem against the collapse of a single lender, a person with knowledge of the plans said.

The commission may suggest banks segregate their consumer banking operations and capitalise them separately, a cheaper alternative to earlier proposals outlined by ICB chairman John Vickers in January, said the person, who declined to be identified.

The proposal would lead to one-time costs in the low billions of pounds rather than the £15bn maximum estimated annual cost of full-functional or geographic segregation, where banks would turn their units into stand-alone subsidiaries, two people with knowledge of the talks said.

The decision would mark a success for lobbying efforts by banks, including Barclays and HSBC Holdings that had warned they would move their headquarters overseas if forced to separately capitalise their investment and consumer banking operations. The government-sponsored commission releases its first findings on April 11.

“It’s a cheap alternative for banks,” said Tom Kirchmaier, a fellow at the London School of Economics. “I’m not sure it would work in another crisis,” because in such an event “there are enormous ripple effects and everyone panics.”

In his January speech, Vickers indicated the five-member commission was considering making banks “ring-fence” their consumer banking activities and raise more capital, while keeping them within a single parent company.