The Bank of England has warned major banks that they could be required to hold £3.3bn of extra capital as a result of proposals to separate high street banking from riskier investment banking operations.
The total figure for the six banks affected – Royal Bank of Scotland, HSBC, Lloyds Banking Group, Barclays, the UK arm of the Spanish bank Santander and Co-operative Bank – was released on Thursday in two consultation papers published by Threadneedle Street.
In a move intended to give banks more clarity about how to implement the ringfencing rules devised by Sir John Vickers in 2011, the Bank set out the circumstances in which the high street operations can pay dividends back to the investment banking arm.
This is likely to provide some comfort to banks such as HSBC, which is considering moving its headquarters from the UK because of the tougher regulatory environment.
The banks, though, have yet to be told precisely how much extra capital they will need to hold as a result of the implementation of the Vickers proposals, because the figure contained in the latest documents only relates to the treatment of one small part of their businesses. They will have to wait until next year for more clarity on this area. The £3.3bn additional capital is less than 1% of their existing capital bases.
Implementing the moves recommended by Vickers, who chaired the Independent Commission on Banking for the coalition government, is expected to add about 5% to banks’ running costs. Threadneedle Street said a bank with £4bn operating costs would face a £200m one-off cost and continuing costs of £120m a year.
Andrew Bailey, a deputy governor of the Bank, said: “Making our firms more resilient has been at the forefront of our post-crisis agenda. Today represents an information step forward in achieving this aim. We have provided clarity for affected banks on how we will implement ringfencing and this will enable firms to take substantial steps forward in their preparations for structural reform.”
At a time when Barclays appears to be preparing to put a fresh emphasis on its investment bank with the expected appointment of the investment banker Jes Staley as chief executive, politicians are pointing to the ringfence as crucial protection for high street bank customers.
The current consultation runs until January, although further consultation will still be needed before the final deadline for implementation at the start of 2019.
This article was written by Jill Treanor, for theguardian.com on Thursday 15th October 2015 10.40 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010