Are investment banks really little more than casinos? The future of Britain’s banks is set to come under further scrutiny when a government-backed inquiry sets out its priorities for the industry.
The Independent Commission on Banking (IBC) is expected to say that it will look into the splitting of retail and investment banking operations.
Critics say this could damage the UK’s competitive edge and make banks flee.
The IBC, chaired by Sir John Vickers, was set up to look at financial stability and competition.
It will take at least a year to review whether investment banks should be split from deposit-taking institutions on the High Street.
Business Secretary Vince Cable has been vocal in calls for “casino” banks to be hived off from retail deposits.
But HSBC recently warned it would consider moving its headquarters from the UK if the commission recommended a break-up, while Standard Chartered has also recently questioned the future of its UK headquarters.
Stuart Gulliver, head of HSBC’s investment banking division, made the warning at a banking conference, saying he was “genuinely concerned” that the banking commission would recommend splitting up banks.
“[That] has significant implications clearly for where we may choose to headquarter our institution.”
“I want to be crystal clear. Our preference is to be headquartered in the UK,” added Mr Gulliver.
The commission is also likely to probe High Street competition – possibly leading to calls for the likes of Lloyds Banking Group to shrink.
Sir John, the ex-chairman of the Office of Fair Trading, is joined on the commission by Clare Spottiswoode, the former director-general of Ofgas, Martin Taylor, a former chief executive of Barclays, Bill Winters, the former co-chief executive of JP Morgan, and Martin Wolf, the chief economics commentator at the Financial Times.
It is expected that they will question the chief executives of all of Britain’s largest banks.
One of those likely to be quizzed is John Varley, the Barclays boss who will hand over leadership of the bank next year.
Writing in the Financial Times, he said that the operations of investment banks were not like casinos, but he admitted they needed to do a better job of conveying their work to the public.
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