Coalition clash looming over banking split
By politics.co.uk staff
A potential eight-year delay in plans to force banks to split their retail and investment arms could prompt a major split in the coalition.
Liberal Democrat business secretary Vince Cable is reportedly prepared to oppose Conservative chancellor George Osborne's enthusiasm for giving banks until 2019 to implement the shift.
A senior Lib Dem source told the Financial Times newspaper that "this is going to be a big fight".
The backroom struggle will take place as Sir John Vickers, the chairman of the Independent Commission on Banking (ICB), prepares to publish his report early next month.
The first draft of the report is believed to have been completed last week. Its contents remain a closely guarded secret, with not even senior Treasury officials aware of its contents.
It is reported that senior bankers have tried to persuade the ICB to amend the recommendation that the activities of banks are ring-fenced,
Many senior bankers believe that breaking up the banks, separating the activities of high-street banking operations and investment banking to lessen the potential impact of any future crisis in the sector, could have negative unintended consequences.
Some analysts believe that breaking up the banks could increase the likelihood of a run on the banks if another crisis occurs and that this could force banks to take precautionary deleveraging action, which would cut off lending to the real economy in times of crisis.
