Members of the Independent Commission on Banking (ICB) yesterday poured scorn on banks' claims about the damage their reforms could cause and warned MPs to be wary of their pleadings.
Sir John Vickers and fellow commissioners told the Treasury Committee their proposals would be good for the UK and the City of London.
The committee's chairman, Andrew Tyrie, asked if the ICB was happy that the Moody's downgrade of RBS and Lloyds was triggered by the reduced state support implied by the commission's proposals.
Sir John said: "In so far as that is a reflection of a step of progress in getting the taxpayer off the hook, I personally would see it as an entirely benign development."
Sir John said removing the Government's implicit guarantee for banks that combine high street operations with trading would raise their cost of funding.
But he added: "Beyond that, there seems every reason to think London remains an incredibly attractive centre to base international operations for UK banks and [others]."
Asked if any bank had said it might quit the UK as a result of the ICB, Sir John said: "We have had nobody make that threat to us."
The commissioners repeated their estimate that the cost of their proposals to the banks of £4bn-£7bn amounted to 0.1 per cent extra on borrowing costs.
They added that they expected the real impact to be less because some of the cost would come out of bank employees' bonuses and shareholders' returns.
Martin Taylor, another ICB member, told the committee: "There is absolutely no reason why the banks [should claim that] anything in this report should reduce the supply or increase the cost of credit to small businesses and if they do you should question them very closely."
The ICB's report, published a month ago, recommended ring-fencing retail banking from investment banking to get taxpayers off the hook for bailing out banks and to take away the Government's subsidy of their trading operations.Reuse content