Vickers to lead shake-up of British banking

Former Bank of England economist to lead investigation of the role and risks taken by banks

An historic shake-up of the British banking system was heralded yesterday with the appointment of a former senior Bank of England official to chair an Independent Banking Commission. Sir John Vickers, a former Bank chief economist and head of the Office of Fair Trading, has been named by George Osborne as the man to stop any repeat of the financial traumas of the last two years.

It is further evidence that the Bank's Governor, Mervyn King, is in the driving seat of reform; the role of the Financial Services authority and its chairman, Lord Turner, has been relegated to that of consumer watchdog. Lord Turner was New Labour's favoured trouble-shooter, for everything from pensions to climate change. Now his future is less clear. Much of the FSA's role will be devolved to a new Consumer Protection Agency and an Economic Crime Agency.

The Chancellor told the Commons that Sir John Vickers' Commission would be charged with:

* reducing systemic risk in the banking sector, "exploring the risk posed by banks of different size, scale and function";

* mitigating moral hazard;

* reducing the likelihood and impact of firm failure; and

* promoting competition in retail and investment banking, "and in particular considering the extent to which large banks gain competitive advantage from being perceived as too big to fail".

Mr Osborne said: "The worst financial crisis in living memory highlighted the significant detrimental impact that failure in the financial sector can have on the real economy and the public finances. We need a proper debate about the future structure of banks, the relationship between retail and investment banking, and the question of how to ensure greater competition in the banking industry."

Labour's former City minister Lord Myners criticised the Chancellor's statement for being "charged with political overtones" and warned that the commission's report would be published too late, months after the G20 meeting in Seoul this November. He said: "Surely it's right that there should be an interim report from Sir John Vickers before Seoul so we can test the Government's position in Seoul against the recommendations coming forward?"

Angela Knight, chief executive of the British Bankers' Association, said: "We welcome Sir John Vickers to his post. We will work with the Government on this and all other banking and business issues. The UK has moved further and faster than other major economies on banking reform. We urge the Government to ensure all changes take account of the international reform agenda."

For the CBI, the director general, Richard Lambert, added: "We welcome the terms of reference for the new Independent Commission on Banking. They pose the right questions in the wake of the banking failures, and they do not prejudge the crucial issue of the future structure of the UK's banking system.

"Business relies on a healthy and confident banking sector, so the sooner these issues can be resolved the better. Sir John Vickers, a distinguished economist with great experience of competition policy, is the right person to chair the project."

The Commission will produce a final report by the end of September 2011. The Commission will report to the cabinet committee on banking, chaired by Mr Osborne, with the Business Secretary, Vince Cable, as deputy chairman.

Economist with the future of lending in his hands

Sir John Vickers is an interesting choice to head the commission charged with recommending whether or not to break up Britain's biggest banks.

An economist of some repute, he first came to public prominence 25 years ago with work on the privatisations of the 1980s, which argued that competition and regulation were more important determinants of the efficiency of a company than its structure of ownership.

That thesis might encourage Britain's biggest banks to hope that Sir John pursues lines of inquiry other than the nuclear option of busting them apart.

Still, the banks cannot rest entirely easily. Sir John's economic background is strong (he was until recently president of the Royal Economics Society) but he also has hands-on experience of a regulator charged with confronting the industries it polices.

He served as chairman of the Office of Fair Trading for five years unti March 2005, though his term of office pre-dated several combative inquiries by the regulator into the credit card and banking industries, which saw a string of bitter disputes with financial services companies.

While Sir John has never dabbled in party-political matters, it will not have gone unnoticed by George Osborne that he was happy to put his name to a controversial open letter to Alistair Darling earlier this year, which urged the then Chancellor to set out plans for tackling Britain's budget deficit much more quickly than he had at the time proposed to do. As a former chief economist of the Bank of England, Sir John's signature on the letter was seen as particularly significant, and the Conservatives seized upon its message gleefully as they sought to attack the Government over its record on borrowing.

Sir John is currently Warden of All Souls College, Oxford, and served for 15 years as the Drummond Professor of Political Economy at the university, during which time he served a stint on the Bank of England's Monetary Policy Committee.

His latest role will see him balance the potentially conflicting demands of the Chancellor and the Business Secretary, Vince Cable, who has been notably more aggressive in calling for banking reform.

David Prosser

VIDEO
Life & Style
tech
Arts & Entertainment
Ricky Gervais at a screening of 'Muppets Most Wanted' in London last month
tvRicky Gervais on the return of 'Derek' – and why he still ignores his critics
Sport
Luis Suarez of Liverpool celebrates his goal
sport
Arts & Entertainment
James Franco and Chris O'Dowd in Of Mice and Men on Broadway
theatreReview: Of Mice and Men, Longacre Theatre
Life & Style
Infant child breast-feeding with eyes closed
healthTo stop mummy having any more babies, according to scientists
News
news
Arts & Entertainment
film
Life & Style
Going down: Google's ambition to build an elevator into space isn't likely to be fulfilled any time soon
techTechnology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Arts & Entertainment
Homer meets Lego Marge in the 25th anniversary episode of The Simpsons, set to air on 4 May
tv
Life & Style
From long to Jong: Guy Pewsey gets the North Korean leader's look
fashionThe Independent heads to an Ealing hairdressers to try out the North Korean dictator's trademark do
Extras
indybest10 best smartphones
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Helpdesk Engineer Apprentice

£150.00 per week: QA Apprenticeships: This company has been providing on site ...

Telesales & Sales Support Apprentice

£221.25 per week: QA Apprenticeships: This company is a well established Inter...

Client Relationship Manager - SQL, Python

£40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

**Financial Services Tax**

£35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

Day In a Page

Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics

Is sexual harassment a fact of gay life?

Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics
Moshi Monster creator Michael Acton Smith: The man behind a British success story

Moshi Monster creator Michael Acton Smith

Acton Smith launched a world of virtual creatures who took the real world by storm
Kim Jong-un's haircut: The Independent heads to Ealing to try out the dictator's do

Our journalist tries out Kim Jong-un's haircut

The North Korean embassy in London complained when M&M Hair Academy used Kim Jong-un's image in the window. Curious, Guy Pewsey heads to the hair salon and surrenders to the clippers
A History of the First World War in 100 moments: A forgotten naval victory in which even Nature played a part

A History of the First World War in 100 moments

A forgotten naval victory in which even Nature played a part
Vespa rides on with launch of Primavera: Iconic Italian scooter still revving up millions of sales

Vespa rides on with launch of the Primavera

The Vespa has been a style icon since the 1950s and the release this month of its latest model confirms it has lost little of its lustre
Record Store Day: Independent music shops can offer a tempting alternative to downloads

Record Store Day celebrates independent music shops

This Saturday sees a host of events around the country to champion the sellers of well-grooved wax
Taunton's policy of putting philosophy at heart of its curriculum is one of secrets of its success

Education: Secret of Taunton's success

Taunton School, in Somerset, is one of the country's leading independent schools, says Richard Garner
10 best smartphones

10 best smartphones

With a number of new smartphones on the market, we round up the best around, including some more established models
Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

The former Australia coach on why England must keep to Plan A, about his shock at their collapse Down Under, why he sent players home from India and the agonies of losing his job
Homelessness: Why is the supported lodgings lifeline under threat?

Why is the supported lodgings lifeline under threat?

Zubairi Sentongo swapped poverty in Uganda for homelessness in Britain. But a YMCA scheme connected him with a couple offering warmth and shelter
A History of the First World War in 100 Moments: When the world’s biggest shed took over Regent’s Park

A History of the First World War in 100 Moments

When the world’s biggest shed took over Regent’s Park
The pain of IVF

The pain of IVF

As an Italian woman vows to keep the babies from someone else’s eggs, Julian Baggini ponders how the reality of childbirth is often messier than the natural ideal