IMA: Bank ringfencing bill should be strengthened
IMA chief executive says Libor scandal adds weight to the argument that banks should be split up.
The Libor scandal enveloping UK banks reinforces the argument in favour of ringfencing investment banks, IMA chief executive Richard Saunders has said.
In a blog on the fund management trade association’s website, Mr Saunders described the fixing of interbank lending rates by Barclays and other banks as “truly shocking”, the effects of which “will be felt by many for years to come”.
The IMA has consistently campaigned for investment banks to be ringfenced from retail deposit-taking banks, and Mr Saunders said the Libor scandal was likely to thwart any attempts to water down such proposals, which are set to be brought in by the Vickers Commission on banking.
He added that the ringfencing proposals would instead be strengthened before the commission’s proposals are put before parliament.
“If you cannot trust the intermediaries who make up capital markets to operate with integrity, that has a corrosive effect on the whole system,” Mr Saunders said. “Investment managers need well-functioning markets if they are to be able to invest their clients’ money optimally. And that requires high standards from the intermediaries, in particular the investment banks.”
He added that it was “hard to say” how individual funds and clients had been affected by the scandal, as the effect on derivative positions would be “mind-bendingly complex” to work out.