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published
SEPTEMBER
19,
2011 |
International
law
firm
Freshfields
Bruckhaus
Deringer
on
the ICB's
final
proposals
on
UK
banking
regulation |
International
law
firm
Freshfields
Bruckhaus
Deringer
says
the
Independent
Commission
of
Banking's
(ICB)
final
proposals
on
UK
banking
regulation,
if
implemented,
will
significantly
affect
the
international
and
domestic
competitiveness
of
UK-based
banks
with
retail
operations
in
the
following
ways:
The report also does not clarify how the
super-equivalent capital requirements (detailed above) may
be squared with the proposed EU fourth Capital Requirements
Directive, the draft of which currently provides for maximum
harmonisation.
Mark Kalderon, a partner in Freshfields’ financial
institutions group, comments: 'Capital ratios will obviously
be the key cost for the banks, however there is a
significant amount of red tape that will increase spend and
staffing requirements. As it stands, some institutions will
be required to implement a dual process of disclosure
similar to that of a UK listed company for separate entities
under a parent. Dual reporting lines will increase
compliance costs and these will inevitably be passed on to
the consumer.’
‘Additionally ring-fenced banks will be required to have
largely separate operations, with intra-group dealings only
carried on at arm's length, thus increasing the complexity,
and presumably the cost, of the provision of intra-group
services,’ he says.
He adds, ‘The report also falls short of proposing full
structural separation of the retail and wholesale parts of a
bank, partly since retail customers can still benefit from a
"one-stop" relationship where they require both retail and
wholesale services, but there is no discussion of the
increased costs to small business of having to deal with
separate entities for their banking and hedging activities
where rights of set-off would be unavailable.’
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