A government-commissioned report led by John Vickers into Britain’s financial system has been published — and its chief recommendation is a separating wall between retail and investment banking. This is a very similar system to what prevailed in America until 1996 under the Glass-Steagall Act of 1933. The chief intent is to prevent the endangerment of customers’ savings, mortgages and pensions through banks’ much riskier and more free-wheeling investment arms. This means that the risky but profitable investment banking sector would no longer be considered infrastructural, and — in theory — would be no longer be eligible for bailouts.
From the BBC:
There has been widespread support for a government-backed commission that has recommended UK banks ring-fence retail from investment banking.
The Independent Commission on Banking, led by Sir John Vickers, said it would “make it easier and less costly to resolve banks that get into trouble”.
The ICB called for the changes to be implemented by the start of 2019.
Chancellor George Osborne said the report would mean UK banks could remain competitive.