Despite warnings that splitting retail banking from investment bank will hurt growth, Vince Cable confirmed this morning on the BBC 1 The Marr Show that the ring-fencing of retail banking was to go ahead.
The Chancellor, George Osborne, is due to announce the details of the moves based on the Vickers report in a Commons Statement on Monday at 3:30 pm.
The Telegraph reports however that some economists, amongst them Vicky Pryce, once joint head of the Government Economic Service, have warned that this will ‘hit growth’ just at the time they say that the UK needs all the growth it can get.
The cost to the economy has been put by some at about Â£7 billion, which is a figure it seems that the Chancellor agrees with.
But some, especially the banks, believe that the cost will be even greater saying that Â£10-Â£12 billion is a more likely figure.
The banks have so far fought tooth and nail to prevent this happening saying that all the recent international rules on such things as capital requirements have done enough to prevent another taxpayer bail-out being needed in the future. Then there are fears that this will signal an end to free bank accounts. There have also been suggestions that the new rules may drive bank head offices abroad.
Vince Cable said on the Marr Show that he and the Chancellor had been working towards separating the ‘casino’ investment banking industry from the retail side of the business.
He also said that there would be a united front presented by the coalition.
The split between retail and investment banks is not however expected to be as severe as Vince Cable has previously called for. But it is seen as sufficient and practical enough to meet the aims of preventing another bail-out being required.
But weaning the banks off of the money provided by access to retail side of the business will be a lengthy process and any announcement is expected to follow the Vickers recommendation of delaying full implementation until 2019.