As mentioned in an earlier article on Suite101, the British banks are facing serious financial difficulties should they carry on the business conduct of the last decade including large mergers and doggy risk-related undertakings. As described by the Independent Commission on Banking in their interim report, changes are necessary for the UK banking system if future financial stability is to be established. BBC News reports that finally the UK Parliament is ready to implement and vote on the reforms proposed by the Commission.
Retail and Investment Banking Changes
The first of the changes that the Parliament would be eager to discuss is the measure that would separate the functions of the banks in the country. Thus investment banking (dealing with governmental bonds, international trade etc.) would be separated from retail banking activity (which ensures consumer banking services such as personal account management and deposit takings). This measure is aimed to reduce the risk takings of banks by separating their capital. Deposits from customers would thus not penetrate the investment banking activities of banks and should any of the sectors experience a failure, the other one would respectively stay untouched in terms of capital availability.
