Banker support for ring-fencing falls |

Monday 5th September 2011 | 11:43

Banker support for ring-fencing falls

In April, shortly before the release of the interim report of Sir John Vickers Independent Commission of Banking, we released a poll in conjunction with City AM, which showed overwhelming support for the idea of ring-fencing of the critical elements of UK banks.

Ahead of the publication of the findings themselves and the sense of a political row bubbling between Coalition partners over the idea of ring-fencing, we re-ran the poll. We also included the effects of a ring-fence on a series of banking policy aims, revealing a widespread concern in the banking sector about the possible damage the reform could cause.

As the chart below shows, support for ring-fencing in the City as a whole remains strong, despite a movement of undecided City workers against the policy.

Among just those working in the banking sector, however, support for the idea has collapsed - and while a small majority of bankers still back a ring-fence, net support have fallen from +46% to +15%. This is surely a reflection of recent rumbling in the press on the dangers of such a scheme to the sector.

Indeed, a plurality of the City as a whole felt that ring-fencing would only help prevent a repeat of the 2008 financial crisis, with similar numbers fearing it would lead to major banks moving their HQs overseas.

Those working in the banking sector, however, thought the idea would make no difference in preventing a repeat of 2008, while thinking it would be actively damaging to promoting UK economic recovery, getting banks lending, as well as keeping HQs in the UK.

While support for taking no government action and leaving regulation to the banks themselves remains very low across the City, it is gaining support within the banking sector.

That said, both the City and especially the banking sector felt that George Osborne should take action to delay or water down ring-fencing, as it may be difficult to implement during the European debt crisis.

There is clearly a tightrope for the government to walk between needing to be seen to be taking action to reform the banks and not wishing to undermine growth by making their lives impossible. While there is clearly concern within the sector about the effects of ring-fencing, it remains one of the softer options, and is a far cry from the full break-up of the banks Vince Cable would like to see. This poll perhaps shows that beyond all the bluster, the compromise of a ring-fence is a fairly strong one.

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