Commenting on the announcement by the Chancellor today that the government is to accept the Vickers Report in full, John Longworth, Director General of the British Chambers of Commerce (BCC), said:
“Reforms to the banking system proposed by the Vickers Report must be considered in the wider context of economic growth. The government must prioritise enterprise, wealth creation, growth and jobs. A strong, well-capitalised banking sector which is prepared to lend is vital to achieving this.
“We cannot afford to see collateral damage among Britain’s businesses as a consequence of banking reform. While there is clearly a need to ensure our banking system is robust, new regulations, however desirable in principle, must not inadvertently derail the recovery or hinder businesses’ access to finance. This is brought into sharper focus given there is still no convincing deal to save the eurozone, and with the Governor of the Bank of England warning of the need to bolster the resilience of the financial system.
“The need for more competition in banking services, particularly for small- and medium-sized businesses, has to be a priority. The existing divestments are a welcome step but will not make a material change to business lending on their own. Further improving competition would mean better terms and conditions for firms, and in time would drive down business costs.
“Businesses still find it difficult to get access to capital, or capital on reasonable terms, in what is a highly risk averse environment. This creates the danger of slowing the recovery and it is possible that Vickers’ recommendations could add to this problem. Given the timescales for the implementation of credit easing, the time may now have come for the government to consider the introduction of an SME Bank.”
“We support the broad aims of ring-fencing in strengthening the UK’s banking system. Delaying its implementation until 2019 is a welcome step, given the concern that it may limit banks’ ability to lend to growing businesses. However, the unilaterally high capital ratios proposed by the report could weaken growth over the medium-term. We should not damage an industry with good growth prospects where the UK has a comparative advantage.
On switching services
“The report includes positive recommendations on improving switching services for customers. If it is easier for businesses to switch between providers, banks will place a premium on good service to SME customers. But, we believe these proposals could go further, such as allowing businesses to take account numbers with them when switching between providers.”