In the FT, analysts warned that the Independent Commission on Banking’s recommendations to ring fence core retail account operations from riskier investment banking side may restrict ability to lend and increase mortgage costs.
However, separate banks’ core retail operations from their riskier investment banking businesses and increase their capital requirements – will reduce their ability to lend and push up the cost of mortgages, particularly for high-capital cost borrowers, first time buyers.
Andrew Hagger of Moneynet, the financial data provider, suggested the costs could fall on savers and borrowers.
However, with the proposed reforms expected to be phased in by 2019 – Charcol’s Ray Boulger said it was impossible to separate the effect of Vickers in the same year as the new Basel III capital requirements come into effect.
But he added: “If they are required to hold more capital, it reduces the amount they can lend.”
