13th April 2011
Here Richard Murphy of Tax Research UK suggests it won't.
His thesis is that ring fencing does not work because there are no accounting concepts that can handle the reporting for it.
More broadly, he also suggests that banks simply do not understand their fiduciary duty to preserve capital, despite it being fundamental to UK law.
As such Murphy is in favour of breaking up the banks.
Taking another tack, the Nottingham University-based Financial Services Research Forum says that it is process not culture that needs to change.
In a report based on research with risk professionals, Dr Simon Ashby, a risk professional himself, suggests that his peers do not believe the Vickers reforms will work but for different reasons. He characterises them as providing an airbag rather than encouraging more careful driving.
The Forum's report recommends changes in risk culture, including improved training, heightened awareness at board level and greater transparency for stakeholders.
Dr Ashby says: "The global financial crisis was ultimately caused by management weaknesses – and, as such, it could have been prevented. If the right changes aren't made now to make financial institutions more reliable then a similar crisis could well happen again."
However, the Economist in its blog, suggests that Vickers may well have embraced the art of the possible.
It suggests that ring fencing comes at an acceptable cost, as does the suggested rise in the amount of capital that big UK banks must hold. He suggests that this increases to 10 per cent, three above the planned international requirement of 7 per cent. The Economist says this number was arrived at through ‘a mixture of research and realism'.
Others see implications elsewhere in Europe. On the Guardian's Ireland business blog, Lisa O'Carroll suggests that Vickers assertion that bondholders should share the pain could well help Ireland as it seeks a renegotiation of its bailout conditions.
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