Volcker says protecting UK banks is not enough-paper
LONDON, Sept 24 |
LONDON, Sept 24 (Reuters) - Protecting Britain's banks will not shield taxpayers in the event of another financial crisis, Paul Volcker, architect of the "Volcker Rule", told the Daily Telegraph.
Volcker, former U.S. Federal Reserve chairman, said plans to force British banks to protect their traditional retail arms from "casino" investment divisions would not work in the event of a bailout.
"In my experience ringfencing is not terribly effective. It only works in fair weather. But (it) doesn't work in foul weather. They have already run into problems and they are bound to run into more," Volcker was quoted as saying.
In the United States, the "Volcker Rule", the precursor to the publication of Independent Commission on Banking chief Sir John Vickers' banking reform proposals in Britain, is aimed at preventing banks from taking risky bets for their own gain rather than on behalf of their customers.
The Vickers report, which was aimed at shaking up British banking, opted for protecting rather than a complete separation of retail banking from riskier investment banking divisions.
"Vickers and I have the same concerns in mind. But the logic would be to separate the two parts of banking, not to keep them within the same institution.
"I find it puzzling to suggest that within one organisation you can have a branch that is entirely independent of another subsidiary, with the confidence that never the twain shall meet?", Volcker was quoted as saying.
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