Vickers’s half-time score: not half as badas bankers feared or bashers hoped
‘Not half as bad as it might have been,’ was the reaction of the first banker I spoke to on Monday about the interim report of Sir John Vickers’s Independent Commission on Banking. ‘And forcing Lloyds to sell off a few more branches won’t do a damned thing to promote competition.’ ‘Not half as bad’ for bankers seems to imply not half as good as it might have been for customers. The increased and ring-fenced capital requirements for retail banking mean borrowers could be charged more for loans, and are unlikely to be offered greater choice. On the other hand, a less crisis-prone banking sector should be capable of sustaining more stable relationships, so that small businesses do not find bank managers urging them to borrow more than they can afford in boom times, then cancelling their limits and refusing to take their calls as soon as head office says the boom is over.
In that sense, Vickers was justified in saying that ‘these are not half measures’, even if they are partially developed (the final report comes in September) and go only a small way towards sating banker-bashers’ blood-lust. Cleaving investment banking from retail entirely was never in serious prospect, and the big banks will have little difficulty finding the extra capital for their retail arms. So I doubt whether any will act on their threats to move abroad, especially (as a useful Reuters report pointed out this week) given the huge tax advantages of staying put.
So that leaves the competition issue which the Treasury select committee and I (if I may modestly put it that way) have been banging on about for some time. New Lloyds chief António Horta-Osório says it would be unfair to his shareholders to force them to dispose of the entire Halifax-Bank of Scotland branch network, rather than the slice of it the EU has already ordered him to sell.