James Moore: Bank shares have been under the cosh – Sir John Vickers is the reason

Those who thought bank break-up talk was quite unthinkable when the Commission was announced have been forced to revise their expectations
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The Independent Online

Banking shares have been under the cosh over the past few days (although there was a bit of revival yesterday) and it's not hard to work out why. The message has got through that Sir John Vickers intends to do a thorough job with the Independent Banking Commission. If that means recommendations that could be considered courageous (and uncomfortable) to put into practice, then so be it.

This could easily translate into suggesting a break-up of the big banks and/or radical structural reform, such as requiring the balance sheets of investment and retail banking operations be separate, even if they are allowed to remain under the same ownership.

Those who complacently thought the break-up talk was unthinkable when the Commission was announced, have been forced to revise their expectations. The mood music is not in their favour. Should the City be worried? That remains to be seen. What Sir John recommends and what actually happens may still prove to be very different. Let's just imagine that the Commission (as most now expect) calls for walls to be put up between retail and investment banks and, perhaps, for larger chunks to be carved out of Lloyds than has already been demanded by Europe (it has required that 600 branches are sold off as the price for all that state aid).

On the face of it, these ideas seem very sensible. The mergerof Lloyds and HBOS requiredthe competition rule book to be ripped up. In reality it shouldnever have been allowed tohappen and the case for abreak-up is incontrovertible.Protecting retail clients' deposits from the bonus boys' casino isalso hard to argue against.

However, given its stake in Lloyds and RBS (which has a sizeable investment bank) both would cost the Government rather a lot of money. The last government always used to get round this sort of issue by kicking reports it didn't like into the Whitehall long grass. It would be easy enough for George Osborne to deal with Sir John by setting up a committee, chaired by a senior civil servant, to look at how best to put his ideas into practice. But, even though that would send a clear message of the Government's ultimate aim (let the banks off the hook), and would make HSBC and Barclays very happy, there would still be too much uncertainty hanging over the shares of the state-backed banks to sell them to any half sensible investor. Apparently the top brass at RBS would like to see the Government start the sell-off next year. Dream on, chaps. Sir John's Commission means that the tax payer is in for the long haul.

Another day another pensions inquiry

Talking of commissions and reforms, the National Association of Pension Funds is today going to launch yet another inquiry into the pension system and why it is failing. An independent commission has been set up that will be chaired by Lord McFall, the former chairman of the Treasury Select Committee who, having left the House of Commons, has been busily picking up worthy jobs.

He will be joined by an impressive supporting cast and their aims are entirely laudable. Even with measures such as auto-enrolment into company pension schemes bringing many more people into the pensions system, Britons are clearly not saving enough for their retirements. With an ageing population and weak public finances that have little prospect of coping, it is an issue that clearly needs to be addressed.

The trouble is we've been here before. Again and again and again. Apparently 84 per cent of people polled for the launch agree that our society needs to rethink how it saves for its old age, while 79 per cent say the UK needs a simpler pensions system.

The problem is that there is a vast industry that makes a vast amount of money from keeping things complex (and finding ever more creative ways to shoot down sensible reforms). The last Government did at least make an attempt to deal with the issue, via the stakeholder pension, but lacked the will to follow the really radical options that were open to it, and eventually allowed the whole thing to drift into disarray.

As for the former, we surely do need a rethink, but whatever solution the committee comes up with, it is going to be expensive. It cannot be any other way because we simply need to save more, which ultimately means committing more of our resources to pensions at a time when inflation, pay freezes and possible interest rate rises are taking deep chunks out of our disposable incomes.

If the pollsters mentioned the cost, that 84 per cent would have been much, much smaller. I wish the Commission the best of luck, but given the repeated failures of the past 20 years, it is hard to see it finding an answer that is capable of securing widespread support, much less dealing with the real problem: a lack of political will to make changes that can oh-so-easily be put off until tomorrow.

Facebook in your shopping basket

Do you really want Facebook in your shopping basket? The latest wheeze from the (slightly sinister) social networking phenomenon is to offer information on cheap deals from shops to its users wherever they happen to be.

Using a smartphone, you provide Facebook with your location and up pops a list of shops touting bargains. Naturally, when you claim one of these bargains, it pops up on your newsfeed. So not only does Facebook get to know your shopping habits, so does everyone else on your friends list. You can see the problems this could cause (imagine if Ann Summers tries to get in on the deal). Is it worth 20 per cent off to let Facebook into your shopping bag? Given its "issues" with privacy and data security? This might be one idea best left on the shelf.