UK Chancellor of the Exchequer George Osborne told the joint Parliamentary Commission on Independent Banking Standards that there is a strong consensus behind the proposed legislation to ring-fence retail banking in a holding company away from proprietary trading and sponsoring hedge funds. The UK legislation neither completely follows the Volcker Rule nor erects Glass-Steagall like separation. He urged Parliament not to unpick the work that John Vickers and his commissioners did that has been accepted by all the major political parties and is now on the verge of enactment.
The legislation would enable the regulator to establish a ring-fenced entity, to ensure its independence and to impose certain duties and directors and the like. The Government is absolutely clear that it will have separate governance; an independent board; separate risk management; separate balance sheets; separate remuneration committees and-as John Vickers added to the list when he gave evidence-capital and liquidity requirements.
Calling for regulatory flexibility, the Chancellor warned against creating a kind of Maginot line in primary legislation that is absolutely right for 2012 and then find out in 2022 that the banks and the industry have completely bypassed it. The legislation must ensure that UK regulators are still fully armed and equipped to do what they need to do. He noted that by the early 1990s, the financial institutions had found ways around Glass-Steagall, and that was one of the reasons why it was repealed by Bill Clinton’s Administration. There is no guarantee that, if you go for some other approach, that will not happen.