UK Chancellor to back banking shake-up

UK chancellor George Osborne is expected to back the report of The Independent Commission on Banking headed by Sir John Vickers, former head of the Office of Fair Trading.

The report, released in September, suggests a mandatory separation of retail banking operations from the more risky investment activities, and is expected to shake up the banking industry, in a bid to prevent a recurrence of the financial sector crisis of 2007.

Banks are however, opposed to the move, saying the it would have far-reaching eceonomic repercussions. They say the reforms could cost the sector up to £7 billion and slow down lending especially when the economy is in the brink of going into recession.

They warn that some banks may move their head offices away from the country, depriving the UK of jobs and tax revenues.

The report recommends that ring-fenced banks should be the only operations that should be granted permission by the UK regulator to provide "mandated services", which include taking deposits from and making loans to individuals and small businesses.

It says that the different arms of banks should be separate legal entities with independent boards.