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Sir John Vickers says his suggested 2019 deadline for splitting retail and corporate banking means the rules pose no risk to the economy. Dominic Lipinski/PA Wire
British Banks

Britain's banks told to split retail and investment arms

An independent commission tells banks that they must secure customers’ deposits from the risks of poor investments.

BRITAIN’S BANKS have been told they must split their retail banking and investment divisions – making sure that customers’ deposits are not put at risk by a bank’s own risky investments.

An independent commission chaired by Sir John Vickers, a former chief economist at the Bank of England, has recommended that ‘fire breaks’ be created between a bank’s deposit and lending book, and its other operations.

The commission’s report, published this morning, said banks could expect to pay up to £7bn (€7.15bn) to put its findings into practice – but that the investment would mean consumer savings could not be lost by a bank’s own activities.

“The commission believes that ring-fencing would achieve the principal stability benefits of full separation but at lower cost to the economy,” the report said.

Chancellor George Osborne told reporters this morning he expected to stick to the timetable laid out by Vickers’ report, which wants the new rules to be put in place by 2019.

The delay in the rules coming into force came after Britain’s major banks, anticipating the ‘fire break’ proposal, appealed to the government to be given extra time to bring those rules into force.

Vickers told BBC Radio 4′s Today programme that the seven-year window given to banks would be enough time to ensure that the reforms did not pose an immediate risk to the British economy.

He also said the proposals would take taxpayers “off the hook” in case any bank’s poor investments ever pose a risk to consumer deposits in future.

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