The new director general of the CBI will today make common cause with the banks, urging the Independent Commission on Banking not to pursue a break-up or take unilateral action.
John Cridland will say: "We believe breaking up the banks would be a mistake. In shaping these reforms we should remember the international nature of the financial system. The UK could put itself at a significant competitive disadvantage, with negative consequences for the broader economy, by acting in isolation."
Mr Cridland will point to "recent economic history" highlighting what he believes could be the consequences of getting reform wrong. "The Sarbanes Oxley response to Enron drove listed companies from New York to London and elsewhere, whilst the Eurobond market came about in the 1960s largely as a result of damaging tax changes in the United States."
Mr Cridland will go on to highlight how the financial sector accounts for around 10 per cent of total economic output, 11 per cent of the UK's total income tax and 15 per cent of corporation tax receipts. "We must not jeopardise this position by acting in isolation on reforms," he argues.
That is a line that has been strongly pushed by the banks. Last week Marcus Agius, chairman of Barclays, complained about the UK going further than it needed and faster than it needed with reforms when compared to international competitors.
The tone taken by Mr Cridland in the submission could be seen as a subtle shift away from his predecessor, Sir Richard Lambert, who infamously warned the chiefs of corporate Britain that they risked being seen as "aliens" if they do not address mounting public disquiet over their rewards.
Mr Cridland is seen by some as a more conventional voice of business, although he does enjoy cordial relations with the likes of the TUC. He will say the CBI backs measures such as using so-called "contingent capital" to help support banks' core services on a going concern basis and the introduction of the proposed Financial Policy Committee to act as a highly skilled supervisory body to spot emerging risks or bubbles. The CBI would also like to see barriers to potential new entrants broken down.
Santander shows strains
The banking giant Santander said yesterday that UK profits had surged by 11 per cent, but admitted it is facing tough competition for savings. And Europe's second biggest banking group after HSBC also showed signs that the grim economic climate in Spain is taking its toll.
Profits at the UK arm – slated for a partial flotation this year – came in at £2.3bn, but net mortgage lending, consisting of new loans less redemptions, fell 27 per cent in 2010, while savings deposits plunged by more than a third.
The UK arm helped offset an even tougher market for the wider Spanish group, which saw bad debt charges drag annual profits down by 8.5 per cent to €8.18bn (£6.96bn).Reuse content