FSA prudential chief: why banks must be ringfenced

Author: Gemma Varriale | Published: 7 Nov 2012
FSA’s Andrew Bailey
The managing director of prudential regulation at the Financial Services Authority (FSA), Andrew Bailey, has publically backed the need for powers to separate trading activities into separate legal entities.

During a speech at a Bank of America Merrill Lynch conference in London on November 6, Bailey addressed the challenges in assessing capital requirements for banks.

The Independent Commission on Banking (ICB), headed by Sir John Vickers, last year proposed a banking ringfence that would require major European banks to build a firewall between consumer and investment banks.

“As Paul Volcker recently pointed out, customer banking involves a fiduciary duty, whereas trading with counterparties does not,” said Bailey, addressing the conference.

But Bailey gave an important caveat: the fiduciary duty of customer banking was...