Britain’s biggest banks saw their shares fall today after a Government-appointed commission unveiled a far-reaching reform package set to cost the industry up to £7bn (€8.1bn) a year.
The Independent Commission on Banking’s (ICB) vision for the sector, which should come into effect by 2019, includes ring-fencing banks’ high street divisions to protect them from riskier investment arms.
Elsewhere in its highly-anticipated report, the ICB said banks should set aside a larger cash base than currently required to cushion the blow of potential losses or future financial crises.
The 363-page report was described by the Treasury as “impressive” and an important step towards a new banking system.
But the Unite union said the proposals “kick the overdue reform of the banking sector into the long grass” and would bring immediate uncertainty to workers in the sector.
Taxpayer-backed banks Royal Bank of Scotland and Lloyds Banking Group saw shares slide 4% apiece, while Barclays fell just over 4% and HSBC dropped 2% as investors digested the impact the reforms will have on the banks’ balance sheets.
Sir John Vickers and his fellow ICB members stopped short of recommending Lloyds must sell more branches than the 632 it has been told to sell by EU regulators but said the Government should ensure the sale leads to the emergence of a “strong challenger bank”.
The ICB said the proposals – which will cost UK banks around £4bn to £7bn a year to put in place – will “put the UK banking system of 2019 on an altogether different basis from that 2007”.