The long awaited White Paper on the recommendations of the Independent Commission on Banking was issued yesterday, by H M Treasury.
A brief summary of the White paper recommendations follows:-
UK Government Publishes White Paper Detailing Way Forward on Vickers
Source: HM Treasury
The UK Government has released its long-awaited White Paper on banking reform, outlining its plans for the implementation of the Vickers Report. As expected the Government’s proposals include a ‘ring fence’ for domestic retail operations of universal banks, and recommend that the largest ring fenced firms hold a capital buffer of 17% against risk-weighted assets. This is a tougher funding requirement than in any country other than Switzerland, and follows the recent agreement on the passage of the new Capital Requirements Directive and Regulation in the EU Council of Ministers, where the UK argued for the flexibility to implement higher capital requirements than the agreed minimum.
The overseas operations of UK banks have been exempted from the ring-fence, in line with expectations. The paper commits to implementing a bail-in mechanism, which will be pursued through the European Directive on resolution, although the White Paper makes clear that there is still work to be done on this tricky area. Depositor preference has also been included, although the report argues for limiting any depositor preference regime to insured deposits. The consultation on the White Paper closes on 6 September 2012, and legislation will be written in autumn.
What does this mean for Jersey?
A review of the White paper reveals specific reference to the Crown Dependencies who are important providers of banking deposits to the UK banking system. Section 2.25 of the paper reads as follows:-
2.25 It is possible that in the future cross-border resolution agreements with other non-EEA jurisdictions will emerge that provide resolution authorities a sufficient level of comfort that branches or subsidiaries in those countries will not present a barrier to resolution, nor an increased risk to the UK taxpayer. Where this is the case, arrangements may be made bilaterally to allow for ring-fenced banks to maintain subsidiaries or branches in those jurisdictions. In this regard, the Government is working with the authorities of Guernsey, Jersey and the Isle of Man to establish the conditions under which branches or subsidiaries in those jurisdictions would be consistent with the objectives of ring-fencing.
It is encouraging to see that a combined effort, by industry, regulator and government has had some impact on accommodating upstreaming of valuable deposits into the Uk banking system.
Solutions are being explored which will ensure these can valuable deposits can be deployed to best effect whether that be via a group Treasury operation or a ring fenced bank.
We will continue to work with the Jersey Bankers Association and the British Bankers’s Association to inform and encourage the right outcome for the UK Banking industry as well as for Jersey, whilst ensuring that we operate in the spirit of Vickers and in accordance with the intentions of the UK government.