Simon Lovegrove: Will the gov’t delay implementing Vickers?

While the transcript is not yet an approved formal record of the proceedings and neither the witnesses nor members of the committee have had the opportunity to correct the record it does give a useful insight into the government’s thinking on the Vickers Report and its plans for reforming the regulatory system generally.

To my mind one of the key questions arising out of the whole Vickers process was whether the government would really bite the bullet and introduce proposals requiring banks to restructure. This question was emphatically answered by Mr Osborne in that he stated to the committee that the government was “absolutely committed” to putting the Vickers proposals into legislation.

There has also been some debate in the industry as to how the proposals would actually be implemented with many suggesting that they would be tagged onto the draft Financial Services Bill. However, Osborne confirmed that this would not be the case and that the government would introduce separate legislation during this Parliament. He further mentioned that a government report responding to the proposals would be published in December.

As to when the Vickers proposals would be implemented Osborne argued that the report had got the right balance with a backstop date of 2019 which is essentially the same timescale as the Basel III requirements and the Basel III timetable internationally.

Interestingly, he also added that this did not mean that certain parts of the proposals could not be introduced earlier although he did not specify clearly which proposals might be introduced earlier. It seems to me that it is fairly safe to assume that early implementation of the ringfence proposals is not on the table.

On this point it is worth mentioning that about half way through giving evidence a member of the committee pressed Mr Osborne into giving an indication as to why he thought the ringfence proposals could not be implemented sooner rather than later. His response was simply to state that giving an indication would pre-empt the position and that 2019 was a backstop. However, he also stated that the government would publish a “detailed timetable” in December so it will be interesting to see where this point ends up.

After a very busy regulatory year many of us were hoping that the finishing line was in sight for a well-deserved Christmas holiday. However, the Treasury seems to have different ideas and an important government paper of the Vickers proposals is on the way.

Simon Lovegrove is a lawyer with the financial services group at Norton Rose LLP