Engineering news
Reforms to the UK's banking sector that promote increased competition are vital in the wake of the release of the Vickers report, manufacturers' organisation the EEF has said.
The EEF warned that while attention was likely to be focused on the restructuring of the banks as proposed by the Independent Commission on Banking (ICB), the difficulties smaller engineering firms had in obtaining finance at reasonable rates should not be ignored.
Terry Scuoler, chief executive of the EEF, said: “While much of the commentary leading up to the report has focused on the proposed restructuring of the UK’s major banks, reforms to improve competition in the UK banking sector are absolutely critical given the state of access to finance, particularly for SMEs.
“Before today, the government had already broadly endorsed the commission’s interim finding in April that some form of separation was necessary between retail and investment banking. We now want to hear government equally endorse the commission’s proposed reforms to boost competition and set about implementing these recommendations with urgency.”
“A lack of competition in the banking sector is worsening the availability of credit on reasonable terms and worsening the cost of credit. This is holding back investment by SMEs at a time when the economy really needs it.”
The ICB's vision for the sector, which should come into effect by 2019, includes ring-fencing banks' high street divisions to protect them from riskier investment arms.
Elsewhere in its highly-anticipated report, the ICB said banks should set aside a larger cash base than currently required to cushion the blow of potential losses or future financial crises.
The ICB said the proposals – which will cost UK banks around £4 billion to £7 billion a year to put in place over the next eight years – will "put the UK banking system of 2019 on an altogether different basis from 2007".
Sir John Vickers said the commission's recommendations ensured banks were more self-reliant so the taxpayer "gets right off the hook". "Measures of this kind will do a lot to contain the damage as well as to reduce the risks in the first place," he said.