Responses to Issues Paper

Independent Commission on Banking: high-level summary of Issues Paper responses

The Independent Commission on Banking received over 150 separate submissions to its Call for Evidence, amounting to over 1500 pages of views and evidence from a wide range of financial sector industry groups, academics, financial sector companies, small and medium businesses, charities, think tanks, and members of the public. The Commission extends its thanks to all those who made contributions.  This statement is intended to provide a high-level summary of the responses, without exploring the detail or offering any Commission views.

There was considerable interest, both positive and negative, in the question of splitting retail and investment banks. Many in favour of a split argued that there is a funding subsidy provided by retail deposits, and that there should be separation of risk and reward for universal bank employees risking shareholder capital. Others in favour of a split argued that the implicit ‘too big to fail’ guarantee was market distorting. Others, however, were against a split, based on the impact on businesses needing access to a range of complex financial products as well as more basic services, the cost of a split to the sector, and the impact on the UK’s competitiveness as a location for financial services. It was also argued by some that a split would not increase financial stability.

There was general support for the ‘living will’ process, though some respondents would go further and ensure ex ante structural separation of banks into separately capitalised subsidiaries, thereby providing additional protection for the retail part of the bank. Some argued that this would reduce the opportunity for cross-subsidies between parts of the banks, though others disagreed, saying synergies would still operate.

There was little support for the notion of narrow or limited purpose banks, for reasons  including the lack of feasibility and the value destruction such a measure might bring. However, some did view fractional reserve banking as a problem, and called for the Bank of England to be the only creator of money in the economy.

The Commission also received views on issues relating to bank capital, liquidity and loss absorbency in the banks. A majority, though not all, of responses on this issue saw Basel III as insufficient. Others were concerned that risk-weighted assets measures are not sufficiently robust. Liquidity restrictions were seen as enhancing stability by some, but as increasing costs to consumers by others. The super-priority of repo assets was also of concern for respondents. While some respondents would like to see more equity, there was general acceptance in principle of the benefit of contingent capital including “bail-in”, though caveated by the observation that there has been limited testing of contingent instruments and that the potential market may still be unclear.

There were respondents who saw proprietary trading by banks as of limited value to the economy and who hence promoted a complete ban on this activity by banks, or at least restrictions on the level permitted, but most respondents saw difficulty in identifying proprietary trading as opposed to hedging and market-making activity. Some did argue, however, that the feasibility of making such identifications should be investigated further. Connected to this was a general view that more transparency would be beneficial across the sector, in particular in fees and charges for retail customers, in specialised derivative instruments and in the balance sheet disclosures of banks, particularly in relation to wholesale market activities.

Retail market competition was the most popular topic for respondents. Much of this interest focused on the Lloyds-HBOS merger, with views split between concerns it has had market distorting effects and  those who considered the State Aid divestments as sufficient to counteract these. The level of concentration in the retail market more generally was a concern for many, though some argued that the UK remained competitive despite this. Switching behaviour was seen as a significant barrier to entry by many respondents, though views were more mixed on access to the payment system. The ‘free-if-in-credit’ PCA model was also seen as a barrier to new entrants by a number of respondents. There were also some who wanted to see greater diversity in the sector, with more credit union membership and mutual models supported, and an increase in financial education and inclusion to ensure better informed consumers. There were also some concerned with concentration in the wholesale sector, and who argued for greater competition measures in this part of the banking industry.

Finally, on the complex issue of the link between financial stability and competition, most responses reaffirmed the position outlined in the Issues Paper, that the link between the two is uncertain and empirical evidence inconclusive. There was a view that there was no reason why the two could not coexist, but that this relied on the presence of good regulation and transparency.

Alongside this summary, the Commission has published all the responses received in its Call for Evidence that were not labelled confidential by the sender.

Responses Received





Alford, Roger

Allen, Bill et al

Association of British Credit Unions Limited

Augar, Philip

Bank of Britain


Barrell, Ray et al (1) (2)

Bates, Ben

Bissmire, Peter

Black Country Reinvestment Society (1) (2)

Bradshaw, Russell

British Bankers Association (1) (2)

Building Societies Association

Burt, Peter


Centre for the Study of Financial Innovation

Chartered Institute of Bankers in Scotland

Christian Council for Monetary Justice


Clark, Don

Clarke, Bill

Consumer Council Northern Ireland

Consumer Focus

Cooper, Rev’d Stephen

Co-operative Financial Services

Crichton, John D

Cut Loose

Dalton, Bruce

Davidson, Nicholas

Dawe, Peter

Duebel, Achim (1) (2) (3) (4)

Duffie, Darrell

eBay UK

Enlightenment Economics

Financial Leeds

Financial Services Consumer Panel

Financial Services Research Forum (1) (2)

Fowler, Adam

Futures and Options Association

Gilfedder, Christopher

Global Policy Institute

Harris, Paul

Hellwig, Martin et al

Henderson, Richard

Hermes Equity Ownership Service (1) (2)

Hill, Malcolm John

Hoares Bank

Hodgson, Graham

Holland, John

Hopkinson-Woolley, Alexander

Horwood, Robert




International Centre for Financial Regulation

Jeffares, Neil

Kirkham, Peter

Kotlikoff, Laurence J


Kurowski, Per

Lai, Alexandra; Mordel, Adi and Kulkarni, Sheisha

Lawson, Nigel

Lindsey, Ian W

Lindsey, Richard G

Llewellyn, David T and Weyman-Jones, Tom

Lloyd, Adrian

Lloyds Banking Group (1) (2) (3)*

Localise West Midlands

London First

Lord, Timothy

Lyons, Bruce and Zhu, Minyan

Maplesden, P

Marvic Textiles

Mathewson, Sir George

McPhail-Smith, Daniel

Menzies, Clive

Miller, Keith

Miller, Marcus et al (1) (2)

Milne, Alistair

Mueller, Bruno

Mullineux, Andy

National Centre for Social Research


New Economics Foundation

Nicolson, Allan

Odell, Tony

Packard, Bruce

Palmer, Nick


Parks, Alan

Payments Council

Pickvance, Chris

Positive Money, NEF and Werner, Richard A

Pringle, Robert and Sandeman, Hugh


Ralph, Christine and Sam

Real Assurance Risk Management

Reed, Nigel


Robbie, Malcolm

Rodgers, Rev Dick

Royal Bank of Scotland*

Salkeld, John

Sargent, J R


Scottish Government

Scottish Parliament Economy, Energy and Tourism Committee

Scott-Quinn, Brian

Seabright, Paul

Semple, Jonathan

Shin, Hyun Song

Standard Chartered*

Summers, D G

Tesco Bank


Thompson, Barry

Tilden-Smith, Tim

Tomlinson, John (via Lord Caithness)

Touchdown Engineering

UK Cards Association

Unite the Union

Virgin Money

Werner, Richard A


Which? – Future of Banking Commission

White, Harry

Wiscombe, Paul

Yorkshire Building Society


The version provided for publication is a redacted form of the original submission