The British Bankers’ Association (BBA) and Confederation of British industry (CBI) have urged the ICB to conduct a thorough cost-benefit analysis of its plans to reduce the threat of bank failures in the future.
The BBA said that, while it backs the ICB’s aim to protect customers, there is widespread concern among banks and businesses that the costs of the proposals “have not been worked through” and overlap other regulation.
In addition, the CBI has said it remains unconvinced the proposals will support economic growth, saying the ICB has failed to make a strong enough case that ring-fencing the banks will achieve its objectives.
Angela Knight, chief executive of the BBA, urged the ICB to analyse the impact on the economy of its proposals before reaching a final decision and make the analysis public.
She said: “There is already a major programme of new and different regulations and requirements. Much of this is targeting exactly the same issues as the ICB proposals.
“While we absolutely agree with the aims of reducing the chance of a bank failure and of ensuring the taxpayer does not have to shoulder the risk, adding layer on layer of regulation will inevitably have an effect on businesses and individuals getting loans – and the price of those loans.”
John Cridland, director-general of the CBI (pictured), said: “Businesses want greater stability in the financial system, but it’s not clear that the current ring-fencing proposals will deliver this, and could in fact lead to greater instability.
“These plans could result in riskier lending within the ring-fence and cause significant disruption to banks and businesses outside the ring-fence in the event of a crisis.”
He added: “All banks have unique business and funding models. If the Commission does progress with ring-fencing, the scope must be sufficiently flexible to recognise this.
“A one-size-fits-all solution would force all banks to have the same business model, which would stifle innovation, reduce competition, increase costs and hamper growth.”
Both the BBA and CBI have submitted their reports on the ICB’s recommendations, saying more work is needed to ensure the proposals do not harm the UK’s economy and businesses.
