Britain's biggest banks to be forced to separate retail banks from investment arms

[Zero Liability]

I'm referring to this. As long as central banks try and keep these as close to zero as possible, the casino will remain in play. The article Xoggoth linked is pretty spot on, although the author doesn't directly implicate the role of central banks (she does indirectly by reference to o/n borrowing) or government policy encouraging homeownership, nevermind the government sponsored 'enterprises' in the US that created a ready buyer for mortgage debt. At present there is more of a case to be made, however, that ZIRP (by stimulating the 'reach for yield') has turned investment banking into a casino as well.

[AtW]

As long as they can borrow for next to nothing, there won't be much of a change in how they assess risk.

With investment banking being inherently more risky and with separation from retail it would mean those will be allowed to fail, then surely their borrowing costs would be much higher?

10% base rate me thinking for the likes of Barclays Kapital

[Zero Liability]

As long as they can borrow for next to nothing, there won't be much of a change in how they assess risk.

[AtW]

Probably have to do business like they would with any other retail bank not part of their group in the future.

It seems logical that investment (ie casino) banks won't have depositors guarantee.

[LondonManc]

Will investment arms be able to raise finance from retail investors?

Would those deposits still covered by guarantee?

Probably have to do business like they would with any other retail bank not part of their group in the future.

[AtW]

Will investment arms be able to raise finance from retail investors?

Would those deposits still covered by guarantee?

[LondonManc]

Meh, these projects/programmes have started already.

Yep. Makes sense too. More jobs created as well in theory, so bonus.

[OwlHoot]

They are running out of time to put this in place. The next crash is coming...

WHS

[PurpleGorilla]

They are running out of time to put this in place. The next crash is coming...

[Dallas]

Meh, these projects/programmes have started already.

[Zero Liability]

Nice bit of window dressing, though.

[xoggoth]

Will it actually help? According to this some of the major bailouts were of banks with no major investment arms.

The retail funding myth

Here too:

http://www.forbes.com/sites/francesc...-ahead-anyway/

[AtW]

" Britain's biggest banks will have to run their retail banking operations as independent banks, almost entirely separate from their investment banking and overseas operations, as the Bank of England made it clear that there will be no relaxation of the incoming ring-fencing rules.

As a result, regulators hope the high street lenders will be able to continue running the retail arms with no difficulties even if their investment banking arms get into trouble.

Basic services such as payments and bank account access should be able to continue even if the parent group collapses. "

Source: Britain's biggest banks to be forced to separate retail banks from investment arms - Telegraph

AtW's comment: that's very good news because those retail banks will be forced to pay real market rates on savings in order to attract money, no more free QE funny money taken from BoE using fantasy Triple AAA tulipe derivatives as collateral