Barclays and Lloyds dispute banking reform

27 January 2011

Leading British banks Barclays and Lloyds have become embroiled in an argument over the future structure of the country's banking sector and its possible reform, it has been revealed.

According to the Daily Telegraph, Barclays submitted evidence to the Independent Commission on Banking (ICB) hinting it would support a move to separate Lloyds and HBOS, while Lloyds recommended punitive measures for universal banks.

Lloyds recommended that financial institutions which combine retail divisions with large investment banking interests - such as Barclays - should have tougher capital charges imposed on them following the financial crisis.

For its part, Barclays expressed concern about the lack of competition in the banking industry, singling out Lloyds' controversial takeover of HBOS in 2009 as being damaging to the wider sector and consumer interests.

"The market for some products has become more concentrated since the crisis," Barclays said in its submission. "In particular, the merger of Lloyds TSB and HBOS has resulted in significant further concentration."

Discussions between British-based banks on a possible compromise over business lending targets and punitive taxation are still ongoing, with former Barclays chief executive John Varley aiming to broker an agreement between the sector and government.

However, the latest dispute between two of UK finance's major players appears to suggest divisions on how to proceed still linger within the industry, with Santander and Standard Chartered already threatening to break away from the joint negotiations.

Lloyds' evidence to the ICB weighed in at over 100 pages, while Barclays provided a 44-page document. Overall, the panel confirmed it had received around 1,500 pages worth of information from more than 150 different sources.

The report came just days after ICB head Sir John Vickers confirmed the committee was considering ring-fencing retail banking operations, while introducing "lighter regulatory policies" in other areas.

By Asim Shah

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