David Prosser: Banking reform that cannot be delivered

Outlook While we're on the subject of hospital passes from the Treasury, it's hard not to feel some sympathy for Sir John Vickers, soldiering on at the government-appointed Independent Commission on Banking. His report isn't due for another 12 months, which means he has to endure a whole year of pretending to consider whether retail and investment banking should be split asunder.

That's a little unfair. Sir John's inquiry may yet conclude that the universal banking model is not one that should be permitted in Britain. But he surely cannot be under any illusion that this is a recommendation the Government is prepared to accept. Even before Barclays appointed an investment banker to the top job and HSBC implied it might quit the UK in the face of the wrong policy, Mr Osborne had been carefully backing away from his opposition to universal banking. And the speed, following the election, with which he dismissed any suggestion that Vince Cable might have any responsibility for banking policy was meant to reassure the City.

Sir John's mandate is twofold. In addition to considering these structural issues, he has also been asked to make recommendations about competition. Having got the message on universal banking, it might be tempting for the Commission to really go for this part of the brief.

If only there was a way to do so – the Council of Mortgage Lenders said yesterday that 90 per cent of mortgage lending last year was done by just six providers. Leave out Nationwide Building Society and you're down to five large banks. For all the talk of new entrants to the market, only Tesco, of the potential new ventures, has the clout to be a real player. And Sir John knows there is little he can do about that.