Vickers calls merger of HBOS and Lloyds 'wrong'

Shares in Lloyds Banking Group and Royal Bank of Scotland tumbled after it emerged that the Independent Commission on Banking had described the decision to allow Lloyds to merge with HBOS during the financial crisis as "wrong".

Lloyds yesterday fell 2.85p to 61.85p, making it the second biggest percentage faller on the FTSE 100 after only RBS, which lost 2.17p to 38.69p. Analysts have long feared that the two part-state-owned banks have the most to fear from the Commission. Lloyds is 41 per cent owned by taxpayers, RBS 84 per cent.

Sir John Vickers made his views clear in a paper presented to the Bank of International Settlements. The paper was published yesterday, but was written sometime ago.

In footnote one of the document Sir John says: "This working paper is a lightly edited version of the draft paper presented in Lucerne on 25 June at the 9th BIS annual conference on 'the future of central banking under post-crisis mandates'. That draft paper, dated 15 May, was written well before I was invited to chair the Independent Commission on Banking announced by the UK Government on 16 June."

However, it is still expected to raise eyebrows and a chill of fear in the halls of the two banks, particularly Lloyds Banking Group.

The Commission described the paper as "a personal view" yesterday and a spokeswoman insisted: "The Commission has reached no conclusions on what recommendations, if any, to make in relation to competition in retail banking."

Ian Gordon, analyst at Exane BNP Paribas, said in a recent note that he believed an expanded carve out from Lloyds – which is already having to sell 600 branches to satisfy EU regulators – was more likely than an out-and-out demerger noting that "even the UK Government's appetite for self-harm has limits".

Yesterday morning those limits became clear when Vince Cable appeared to soften his stance on bankers' pay and bonus disclosure. It follows signs of a furious disagreement over the Chancellor George Osborne's decision to axe plans to force banks to make disclosures on pay deals in favour of seeking a Europe-wide deal. Mr Cable, the Business Secretary, said in a radio interview that reforms could be achieved through international banking regulation and domestic reform "which is what the Chancellor is trying to do at the moment".

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there