I revealed in this morning’s FT that Nick Clegg and Vince Cable want to reopen talks on how to put the Vickers recommendations on banking reform into law.
When the commission led by Sir John Vickers first set out its proposals, the government accepted most of them – most significantly that banks’ retail operations should be ringfenced from their investment banking side.
But the banks won two crucial victories in their attempts to water down these proposals. The first was that the government scrapped the Vickers recommendation that ringfenced banks should have stricter standards on how much equity they had to issue compared with their assets. The second was that ministers allowed for interest-rate and currency swaps to be sold from within the ringfenced arms of banks, putting them in the same category as ordinary loans and making them cheaper and easier to sell.