By Max Clarke

More work is needed to ensure that the changes proposed by the Independent Commission on Banking (ICB) stimulate business growth, job creation and economic recovery, the CBI (Confederation of British Industry) has said.

Businesses need more stability in the banking sector and recognise that this comes at a price, but much remains to be done to demonstrate that the balance between the costs and benefits of the proposed changes is positive.

Companies see real value in the universal banking model, in terms of integrated services as well as being able to spread financial and operational risk, so do not want to see any separation of retail and wholesale banking.

The ICB's recognition that increasing competition in the banking sector is important for both retail and business customers, has been welcomed by business, as CBI Director General, John Cridland comments:

“Companies want a highly competitive banking sector to help promote choice in lending and other banking services. They are concerned that the current ICB proposals do not focus sufficiently on driving greater competition and choice in the business banking sector.”

However, elements of the ICB's proposals have been less well received:

“All banks have unique business and funding models so if the Commission does progress with ring-fencing," continued Cridland, "the scope must be sufficiently flexible to recognise this.

Ring fencing, the CBI insist, would lead to riskier lending as a result of the perceived increase in security, as well as make credit less available in the event of future crises.

“A one-size-fits-all solution would force all banks to have the same business model, which would stifle innovation, reduce competition, increase costs and hamper growth,” concluded Cridland.

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