Firms issue warning against too-tight ring-fence on banks

A GROUP representing the UK’s top 100 leading companies has warned that too tight a ring-fence on banks will have severe consequences for the UK’s struggling economic recovery.

The Association of Corporate Treasurers (ACT) said that plans proposed by the Independent Commission on Banking (ICB) to split the banks’ retail and investment arms would make borrowing for companies more expensive if they are too restrictive.

Policy director James Grout said this would have knock-on effects for the economy overall, with companies trying to offset the higher costs by reducing costs elsewhere so production and employment could be hit.

Hide Ad
Hide Ad

The ICB is expected to make some form of separation a key recommendation in its report into changes needed to the structure of the banking industry to avoid a repeat of 2008’s credit crisis.

The final version of the report is due to be published on September 12, but the banks have already warned of the possible consequences if a strict ring-fence is imposed.

HSBC chief executive Stuart Gulliver recently indicated potential job losses in the UK would depend on the outcome of next month’s report.

It is understood he thinks that the bank’s corporate lending division would have its ability to lend severely reduced if UK retail deposits are separated from its business lending arm.

Hide Ad
Hide Ad

Concerns about lending to small business are already growing after the UK banks missed the half-year target agreed with the Government under Project Merlin.

This agreement stipulated banks would lend £76bn to small and medium-sized enterprises this year.

Lloyds has taken all three suitors for the 632 branches it has to sell to the second round of the bidding process.

The three suitors, NBNK, Co-operative Financial Services and Hugh Osmond’s Sun Capital Partners, will receive detailed trading information this week at a series of meetings.

Hide Ad
Hide Ad

It is thought that NAB, which owns Yorkshire and Clydesdale Banks, is reserving its right to enter the bidding process at a later stage.

It is not thought that NAB will attend this week’s presentations.

Related topics: