British bank chiefs warned today that plans to ring-fence their higher-risk investment arms would cost the British economy.
Speaking to a House of Lords Committee on the Independent Commission on Banking’s (ICB) proposals, Royal Bank of Scotland chief executive Stephen Hester said the move would also undermine the competitiveness of UK operations.
But he acknowledged that the reforms, endorsed by the Government last month, were a “done deal” and that “we’ve now just got to get on with it”.
He said elements of the ICB recommendations were just an extension of what was being proposed internationally and so would have a “modest” effect on the UK.
But on the ring-fencing of so-called “casino banking” from high street retail services, he said: “It’s our judgment that ring-fencing will have significant additional costs to the economy and those costs will not be balanced by the benefits.”
Speaking to the Economic Affairs Committee, he added that it was “highly likely” that the proposal would “work to the disadvantage” of British banking in competitive terms.
Bob Diamond, chief executive of Barclays, said the banking system was already “safer and sounder” as a result of changes made since the financial crisis and doubted the need for some of the ICB recommendations.
“It wouldn’t have been our first option because ring-fencing has added costs. But we can live with it,” he said.
Mr Diamond said the banks could “only estimate the costs” before they knew exactly how the ring-fencing would be operated.