Bank ring-fencing architect supports `electrification'

Sir John Vickers, the architect of ring fencing of UK banks has welcomed proposals from MPs to reinforce the ring-fence by "electrification."

John Vickers, who chaired the UK's Independent Commission on Banking (ICB), told the Parliamentary Commission on Banking Standards he welcomed anything that reinforces the ring-fence, including the commission's proposals for "electrification" - where the financial regulator is equipped with a 'reserve power' to separate the activities of banks that violate the ring-fence.

Sir John, who headed the Independent Commission on Banking, told the Parliamentary Commission on Banking Standards today that he believed electrification would make it likely that the retail parts of the banks would be ring-fenced from their investment business.

Giving evidence to a parliamentary inquiry, Sir John said he supported calls for legislation that would give the government reserve powers to break up banks if they tried to find ways to dodge the ring-fence.

However, he said he saw no need for a full break-up, as it would prove expensive and might not produce any positive benefits.

"I believe ring-fencing will work without reserve power but there is an even higher likelihood of it working with the reserve power," Sir John told the Parliamentary Commission on Banking Standards.