The Vickers Review into the future of banking appears to have prevented a possible coalition row. The Tories and the Liberal Democrats have had different views on what to do about the banks, with the Lib Dems keener to break up the banks come what may and the Tories more worried about preserving the competitiveness of the City.
At the very start of the coalition there was a rather unseemly turf war between Cable and Osborne about who controlled policy on the banks, and many have expected a row to break out when he review reported. But, as we predicted on Coffee House back in February, the review has come up with a solution acceptable to both sides.
The ‘ring-fencing’ of the retail and investment branches of banks allows the Liberal Democrats to say that retail and investment banking have, effectively, been split as they have long demanded. Indeed, Clegg came as close as he could to fully welcoming the review on the Today Programme this morning.
For the Tories, the review presents its conclusions as part of a broader international response. It talks about the ring-fence it is proposing as sharing a ‘common motivation’ with the Volcker Rule, recently introduced in the States. It also stresses that the reports’ recommendations would have a ‘broadly neutral’ effect on financial services. In other words, it would not harm their global competitiveness.