Bloomberg News

U.K. Bank Firebreaks Said to Be Imposed by 2015 at Earliest

September 01, 2011

(Updates with closing share prices in seventh paragraph.)

Sept. 1 (Bloomberg) -- British banks won’t be compelled to implement proposals from the government-appointed Independent Commission on Banking until 2015 at the earliest, according to a person with knowledge of the discussions.

The date is the soonest possible for the commission’s recommendations, said the person, who declined to be identified because the talks are private. Introducing the new rules as late as 2018 has also been discussed, the person said.

The process will take years rather than months because the issues are complex, a government official said. Shares in Royal Bank of Scotland Group Plc, Lloyds Banking Group Plc and Barclays Plc gained the most among the 46-member Bloomberg 500 Banks Index.

With the ICB due to report on Sept. 12, banks and industry lobbyists have argued that any new rules should be postponed because of the U.K.’s faltering economic recovery. The commission, led by John Vickers, 53, an Oxford academic, recommended in April that the U.K.’s biggest banks should boost capital, introduce plans for an orderly bankruptcy and erect firebreaks around consumer units to protect taxpayers from further bailouts.

Business Secretary Vince Cable, a Liberal Democrat, and Chancellor of the Exchequer George Osborne, a Conservative, will not respond to the report with immediate proposals for legislation, a person with knowledge of the coalition government’s thinking on bank regulation said last month. Instead, the Cabinet’s banking committee will consider what action to take and put forward plans before the end of the year.

Shares Rise

A parliamentary bill to implement ICB recommendations will need to be approved by both the House of Commons and the House of Lords before it can receive assent from Queen Elizabeth II and become law. The process normally lasts several months once it has secured a place on the government’s legislative timetable.

RBS rose 8.2 percent to 26.25 pence in London. Lloyds traded up 6.2 percent to 35.67 pence and Barclays gained 5.6 percent to 180.35 pence.

Cable, “who’s been one of the more vocal critics of banks and has been making some of the more aggressive recommendations towards the Independent Commission on Banking’s potential course of action, has clearly started to moderate his message and this starts to remove some of the regulatory pressure that has been a major reason for U.K. bank underperformance more recently,” said Alex Potter, an analyst at Berenberg Bank in London.

The government would be “barking mad” to implement the proposals immediately given the fragile state of the economy, John Cridland, director general of the Confederation of British Industry, said in a BBC interview yesterday.

--With assistance from Howard Mustoe and Gonzalo Vina in London. Editors: Francis Harris, Jon Menon

To contact the reporters responsible for this story: Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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