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The Vickers report on the state of the UK banking market has been well leaked ahead of publication to try and soften the blow to the markets and stop any material shorting of bank stock following publication. On a day that many held their breath, the net result on share price was unspectacular, but which of the clearing banks will feel the brunt of the banking reform the most?
HSBC continues its talk of leaving the UK but this is more of a veiled threat than a future reality and the UK needs HSBC as HSBC needs its base in the UK. In summary, the world’s local bank would suffer untold damage if they simply upped sticks and fled!
Barclays will be the biggest losers as they rely on their more sporty investment division to deliver its profits and the increased capital requirement will blunt its efforts in attracting the best staff, that, despite eye watering salaries, actually make excellent returns for its employer and therefore indirectly for the UK through tax contribution.
Lloyds TSB will be the least affected by the changes but will still need to budget for the massive cost of regulation that will run into billions each year. Still predominantly a retail bank, the segregation reform will have little direct impact and may pave the way for the bank to grab a slice of the lucrative pie from its ailing competitors.
Whilst the plight of the banks has been of their own making (well, the US to be exact!), it cannot be lost on the country the huge importance of nursing these institutions back to health to facilitate a share sale back to the private sector in the medium term. The monies are needed to address the deficit and will prove a more popular choice than simply cutting public spending and hoping for the best regardless of the economic consequences.
It is now time for the public and the press to get behind the banks and start to wake up to the fact that the UK needs these once great financial institutions to rise once again for the greater good of the entire country