Vickers: U.K. Banks Vulnerable to Global Shock; Others Put Faith in Bail-In
Feb. 15, 2016 (EIRNS)—Sir John Vickers, former Bank of England Chief economist and former chairman of the Independent Commission on Banking, is warning that British banks are vulnerable to "external shocks," while others put their faith in the bail-in.
"The Bank of England proposal is less strong than what the ICB recommended," Vickers told the BBC. He warned that the BOE watered down the ICB proposals to have adequate "financial buffers."
The ICB had recommended that a 3 percent buffer for so-called systemic risks, was to be added to the capital of the bank, and a total capital holding of 18%, but the BOE refused to implement this, according to Vickers.
"If banks run out of capital, all sorts of havoc could ensue. We want to be in a position where there’s enough of a buffer to take any losses that might occur."
Others are putting their faith in the bail-in. Martin Taylor, the former Barclays chief executive who sat on the ICB inquiry panel, recently told MPs he was happy with the rules. He said:
"There is still a heck of a gap, as you rightly point out, between 13% and the Vickers Commission’s 18%, but the Vickers Commission was operating on the assumption that there would not be bail-in-able debt, if I can put it that way, which we now have or shall shortly have."
Taylor fails to say that it is just the new bail-in policy which has caused a collapse in the banks’ share prices. The Guardian points out that while the focus has been on the troubles of Deutsche Bank, whose share price has collapsed, the British banks are not much better; Standard Chartered is at 25-year lows and HSBC is at 2009 levels, the year of the great collapse.