In the autumn of 2012 the Vickers' report scoped ring fencing as one of the future safe guards to limit bank failure. It detailed which activities should be required to be within the retail ring-fence? The aim of isolating banking services whose continuous provision is imperative and for which customers have no ready alternative implies that the taking of deposits from, and provision of overdrafts to, ordinary individuals and [SMEs] small and medium-sized enterprises should be required to be within the ring-fence.
The aims of insulating UK retail banking from external shocks and of diminishing problems [including for resolvability] of financial interconnectedness imply that a wide range of services should not be permitted in the ring-fence. Services should not be provided from within the ring-fence if they are not integral to the provision of payments services to customers in the European Economic Area.
The Commission’s view, in sum, is that domestic retail banking services should be inside the ring-fence, global wholesale/investment banking should be outside, and the provision of straightforward banking services to large domestic non-financial companies can be in or out.
What this does is return banking to what it once was before someone had the bright idea of amalgamating all banks.
Today on BBC Radio 4 Today programme, Sir John Vickers has warned that the future safety of Britain's banks is at risk and has said that Bank of England proposals are not strong enough. He says banks need more capital because no-one can predict the nature or scale of the next shock to the system.
Sir John Vickers, who headed up the [ICB] Independent Commission on Banking, said: "The Bank of England proposal is less strong than what the ICB recommended."
But Bank of England Governor Mark Carney said in December that banks largely have or have access to the reserves they need. "We will not increase capital... the overall level of capital won't increase in the system."
The ICB report recommended that the six largest banks should have 3% of extra capital in reserve compared to loans, when taking into account their risk. The new Bank of England suggestion is for a 2.5% buffer for the very largest, and as low as 1% for the smaller lenders of the six.
There are mixed messages here and one of the reasons why after four years since the Vickers' report and eight years since the global financial collapse nothing of any substance has been done.