Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

'Electrify' bank ringfence, says Tyrie's standards commission

'Electrify' bank ringfence, says Tyrie's standards commission

The Parliamentary Commission on Banking Standards has called for a complete overhaul of banking culture in the wake of the Libor scandal.

In a detailed review of the sector, the Commission chaired by Andrew Tyrie slammed banks in week which saw UBS hit with a massive $1.5 billion for manipulating the Libor rate.

'Investigations into Libor have exposed a culture of culpable greed far removed from the interests of bank customers, corroding trust in the whole financial sector,' the report said.

While the Commission supported the proposals set out by Sir John Vickers to protect their retail arms by 'ringfencing' them, it believes the government should impose tougher measures to insure banks abide by the rules.

It said: 'The Commission welcomes the creation of a ringfence. It can, in principle, contribute to the government’s objectives of making the banking system more secure. It is essential that banks are restructured in a way that allows them to fail, whether inside or outside the ring-fence. Ringfencing can also help address the damage done to culture and standards in banking.'

'But the proposals, as they stand, fall well short of what is required. Over time, the ringfence will be tested and challenged by the banks. Politicians, too, could succumb to lobbying from banks and others, adding to pressure to put holes in the ringfence.'

For the ringfence to succeed, the Commission said banks need to be discouraged from 'gaming' the rules. 'All history tells us they will do this unless incentivised not to,' it said.

'That’s why we recommend electrification. The legislation needs to set out a reserve power for separation; the regulator needs to know he can use it.'

The Commission also recommended periodic reviews of the sector to ensure the ringfence is working.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Boutique tapes: my business will never be sold

Boutique tapes: my business will never be sold

In the final part of our four part series we discuss consolidation and whether it's getting tougher for boutiques to survive.

Play Boutique tapes: are top managers better off at small firms?

Boutique tapes: are top managers better off at small firms?

In episode three of our series, boutique bosses discuss whether the best fund managers are more likely to thrive at smaller firms.

Play Boutique tapes: if you want a Ferrari, you have to pay for it

Boutique tapes: if you want a Ferrari, you have to pay for it

In the second part of our four-part series, boutique bosses are asked how they can justify the fees charged by active managers.

Read More
Your Business: Cover Star Club

Profile: how this boutique beat the big guns of wealth

Profile: how this boutique beat the big guns of wealth

This small west country offshoot of a local IFA scooped a 2018 Citywire award from beneath the noses of the national challengers

Wealth Manager on Twitter