Independent Commission on Banking interim report – PwC comments

12 Apr 2011 09:55 AM

Following the publication of the Independent Commission on Banking’s interim report this morning, PwC’s banking experts are available for comment on the potential impacts on the UK banking industry, economic growth and consumers.

Andrew Gray, UK banking leader, PwC, said:

“Creating a firewall between retail and investment operations may not be as simple as it first seems. For example, while branches can be clearly identified, many of the banks have integrated support services which will be harder and costly to separate. While ring-fencing certain banking operations could mitigate the risk of contagion, it could also have the unintended consequence of increased costs being transferred to consumers. There will need to be clear rules to ensure the ring fencing works in practice and does not have other undesirable consequences.

“The UK banks provide a great source of revenue so there will naturally be concerns about how any reforms could impact their ability to compete on a global stage. The banks will be watching what other countries do to in the hope that proposals will not create an uneven regulatory playing field.

“The sale of assets such as branches is only one aspect of ensuring adequate competition. Having an extra one or two banks to choose from is unlikely to have as big an impact as, say, ensuring price transparency or making it easier to switch bank accounts.

“There is far more capital in the banking system than during the financial crisis and requiring banks to hold even more could force mortgage, loan and credit costs to climb. Increasing capital requirements would also make it harder for new banks to break into the market."