Osborne backs ring-fencing of key bank services-FT

LONDON, April 8 (Reuters) – Britain’s Finance Minister
George Osborne is set to support reforms to make UK banks
safer, including a costly proposal to ring-fence “essential”
banking services, the Financial Times said citing his allies.

The Independent Commission on Banking (ICB) is due to
publish its interim report on April 11 but an embargoed copy
was handed out on Friday, sources close to the commission told
Reuters. [ID:nLDE7371ZY]

The commission favours a ring-fencing of “operationally
essential” parts of Britain’s biggest banks, the FT said in its
Saturday edition quoting people briefed on the report.

This is in line with expectations by analysts polled by
Reuters, who said the commission was likely to recommend that
UK banks form separate subsidiaries for their retail banking
and investment banking operations in order to protect savers if
the investment bank fails.

The ICB was not available for comment.

A spokesman for the Treasury — some of whose officials had
received copies of the report according to a Reuters source —
said: “The government is not being drawn into pre-empting the
report and would never get drawn in speculation.”

He declined to comment further.

While a ring-fencing proposal would not be as drastic as
recommending that groups split their retail and investment
banks into two separate companies, analysts say it could put
onerous new capital requirements on the top UK lenders.

These are Lloyds Banking Group (LLOY.L: Quote, Profile, Research), Barclays, HSBC
(HSBA.L: Quote, Profile, Research) (0005.HK: Quote, Profile, Research) and Royal Bank of Scotland (RBS.L: Quote, Profile, Research).

The ICB’s findings could also affect Spanish bank Santander
(SAN.MC: Quote, Profile, Research) and Standard Chartered (STAN.L: Quote, Profile, Research), which is
headquartered in London despite making most of its money
overseas.

Monday’s interim report from the commission comes before it
makes its final conclusions in September.
(Reporting by Olesya Dmitracova; Editing by Diane Craft)

Osborne backs ring-fencing of key bank services-FT