There were two sharp manoeuvres by George Osborne as he broadly endorsed the Vickers proposals on Monday.
The first was to grant HSBC's greatest wish (though of course the chancellor didn't put it like that) by saying the minimum loss-absorbing capacity of big UK-based banks should be 17% "except where they can demonstrate they do not pose a threat to the UK taxpayer".
That phrase, slipped quietly into the speech to the House, will have provoked cheers at HSBC. The bank's management had been terrified that £35bn of fresh capital would have to be raised to support assets that are primarily held outside the UK. Now, assuming HSBC can argue successfully that its use of various subsidiaries around the globe makes its banking model inherently safe, the danger has passed.
Is that a reasonable compromise for a bank that didn't need support from taxpayers, or a feeble surrender to an institution that was issuing vague threats to move its HQ out of the UK?
Let's hope Sir John Vickers and his fellow commissioners answer that question. Vickers initially ducked it in welcoming the government's response. The public would rather he offered an opinion on whether it is sensible to give HSBC what looks suspiciously like a tailor-made get-out clause. Is the taxpayer still protected as intended? Time to get off the (ring) fence.
Osborne's other manoeuvre was less substantial and more presentational. He seemed to want to claim credit for forcing Royal Bank of Scotland to shrink its investment bank. But Stephen Hester, the bank's chief executive, had decided that RBS should get smaller. He has halved the assets in RBS's investment bank once and announced further major retreat last month. His rationale had nothing to do with entreaties from the Treasury: it's simply that funding has become more expensive and last year's juicy 16.6% return on equity in the global markets division was probably a last hurrah.
Of course, it suits the chancellor's book to fuel the idea that he's bouncing RBS into going further than it would have done otherwise – that line will come in useful when bonuses are declared in the new year. The truth, though, is that the proposition is impossible to test.
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