Commenting on the Chancellor’s endorsement of retail banks ringfencing their operations, David Sayer, global head of retail banking at KPMG, said: “Until the Chancellor sheds more light on the specific details of retail ringfencing, the banking industry is not much closer to understanding the full ramifications of the Independent Commission on Banking’s interim recommendations.
“There are many issues, including the basic definition of retail banking, that are yet to be clarified. It is unlikely these topics will be addressed in this evening’s Mansion House speech, which means that all eyes remain focused on the ICB’s final paper due in September.
“Like Dodd Frank in the US, the real work is yet to be done and the devil will most certainly be in the detail. It is interesting and important to contrast the ICB’s initial recommendations with Dodd Frank. The ICB report starts by trying to define retail banking and ringfence that, while Dodd Frank starts by trying to indentify risky operations and carving that out. As both processes progress we’ll learn which is the easier approach.”
Questions that remain unanswered in the UK include:
· Will retail deposits continue to be usable to fund lending to small businesses and corporates?
· Where will retail business end and investment banking begin?
· How much will it cost to achieve full legal and operational separation?
· Who will bear the cost of transition?
· Will customers receive less for their savings if their use is restricted?
· Who will pay for the ongoing higher levels of capital?
Notes to editor
For further information please contact
Monica Fiumara, Senior PR Manager, KPMG
Tel: +44 (0)20 7694 5674
Mobile: +44 (0)7901 105180
KPMG Press Office: 020 7694 8773
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have more than 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services