One suspects they are foot-dragging in the hope something will turn up in Brussels to get them off the hook
Ed Miliband is right: most of the banks require a hefty kick to encourage them to implement the Vickers reforms quickly. It’s a nonsense that the deadline for implementation of the ringfencing proposals has been set for 2019.
The threat that a Labour government would legislate to break up non-compliers in 2015 should serve as encouragement to hurry up. As it happens, Lloyds Banking Group has already pledged to speed up the erection of its fences – but its rivals should too.
The banks’ foot-dragging, one suspects, is born of the hope that something will turn up in Brussels to allow them to plead that competitive playing fields must be even. Finally, though, continental Europeans do seem to be embracing ringfencing. Finnish bank governor Erkki Liikanen’s working group has embraced proposals along the lines of Sir John Vickers’ ideas for the UK.
There’s absolutely no prospect of Liikanen’s ideas being adopted and implemented by 2015, but they do indicate the way the regulatory wind is blowing. Miliband should keep pressing. It’s not hard to imagine that by 2015 it will seen as a competitive advantage for a bank to have its ringfence in place.
But don’t get carried away with the idea that the “break up the banks” passage of the Labour leader’s speech was truly radical. A radical version would say that a breakup would be good in itself for competition. For example: why not let Halifax, currently laughably described as a “challenger” retail brand even though it is housed within the market-leading Lloyds group, swim free? How about forcing NatWest to escape from Royal Bank of Scotland and provide some stiffer competition in business banking? Miliband is not on that territory.
Ending the requirement for companies to report on a quarterly basis is a good idea, endorsed by John Kay’s recent review into the cause of short-termism in the City. Many big businesses will applaud, which makes for an easy political win.
It will be harder to argue the case for disenfranchising nasty hedge funds who swoop in search of a swift kill when a takeover bid is tabled. Equal rights for equal economic risk is a fine and established principle in normal times – and nobody has yet found a trouble-free way to limit its application during bids.
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