albeit in interim form. Sir John makes a good case for the protection of retail banking in the UK in future.
The implicit suggestion is that by protecting retailers, other parts of banks can fail and the State will not have to offer blanket guarantees. However, the big miss here is the failure to really make clear how the Commission has viewed corporate banking. There is a use of a catch-all term of Investment Banking but this is not the same thing. If a major bank like RBS went down it would also take 28% of all UK corporate loans with it, this wold cause huge issues to the UK economy. The device chosen in the report of simply looking to only guarantee retail deposits does not really do enough to sort out the 'too big' part of the 'too big to fail' question.
For the Government there is much to cheer, criticism of the Lloyds/HBOS merger and a suggestion of further break-up; one in the eye for the former Government. However, the lack of break-up of Investment and other Banking is not much of a success for either George Osborne or Vince Cable.
I see many articles claiming that it was not investment banking that brought down the UK banks; Northern Wreck, HBOS etc. However, RBS, the biggest beast by a long way, was indeed smashed by its GBM arm. There is a strong case for banking to be split into utilities and casino banking; it would require a global level agreement but this should be pursued and not given up on. Alone, the UK is not in the best position to enforce this division as Barclays will go to NY and HSBC to HK.
The final main recommendation is the move to 10% capital retention over the current 7% of Basle III. What this means in that banks will have to hold over 30% more capital on their books in the form of cash equivalents. This will directly translate into lower overall lending; directly against the Government off-stated targets of getting the banks to lend again. Enacting this policy whilst we are not yet out of recessionary times will be madness - typical civil servant gold plating.