Banks relieved as customers to pay for risks

(Daily Telegraph): Shares in leading British banks rose on Monday after an official report rejected radical change in the industry and said customers should help pay the price of preventing another financial crisis. The Independent Commission on Banking said banks should be made to hold larger capital reserves to ensure they could survive any future crises without requiring state help. That will push up the banks’ costs, which will be passed on to customers in the form of higher interest rates, the commission said. The result will be higher mortgage rates and, potentially, lower house prices, it said. The report said large banks like the Royal Bank of Scotland and Barclays should "ring fence" their high street operations and their riskier investment arms.

But the commission stopped short of recommending that the banks separate their retail and investment operations completely.

That was a relief to the City, and banking shares rose on a day when the FTSE 100 was flat. Barclays was the biggest gainer, closing 2.8 per cent up, while Lloyds TSB and RBS also rose although HSBC fell.

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