UK bank shares rose sharply today amid signs that a far-reaching shake-up of the sector will be delayed until after the country's planned 2015 general election.
The Financial Times reported that Vince Cable, the British Cabinet’s most vocal bank critic, had accepted it may be impossible to implement recommendations from the Independent Commission on Banking Commission (ICB) before the election.
Banks have argued that the ICB’s proposed ringfencing of their retail arms from other banking operations will impose additional burdens at a time when they are being told to increase business lending.
Shares jumped on the speculation today, with Royal Bank of Scotland up more than 8%, Lloyds Banking Group ahead 6%, and Barclays 5% higher.
The ICB is due to present its final report on September 12, although it will be up to Chancellor George Osborne to decide whether and at what pace to implement any reforms. The FT reported that it was likely the legal framework for the changes would be put in place before the general election.
Lobbying by industry groups ahead of the report’s release has intensified in recent days, with CBI director general John Cridland saying the Government would be “barking mad” to press ahead with the changes, given the darkening clouds over the UK economy.
And Angela Knight, chief executive of the British Bankers Association, said plans to reform the sector should be put on hold until the economy has recovered and taxpayers have been repaid for bailing out the banks.