Commission sets out plans for stable UK banking

An improved banking system would be:

• much less likely to cause, or succumb to, financial crises and the huge costs they bring;
• self-reliant, so that the taxpayer does not have to bear the losses that banks make; and
• effective and efficient at providing the basic banking services of:
  • safeguarding retail deposits;
  • operating secure payments systems; and
  • efficiently channeling savings to productive investments in the economy.

Stability is crucial and UK banks should have more equity capital and loss-absorbing debt – beyond what has so far been internationally agreed – and their retail banking activities should be structurally separated by a ring-fence, from wholesale and investment banking activities.

The Commission also addresses competition, which has not been properly effective in UK retail banking. They recommend a seamless switching system based on redirection for personal and small business current accounts, free of cost and risk, complemented by measures to enhance transparency. The new Financial Conduct Authority should have a clear duty to promote effective competition.

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