Vickers' "electric fence" - are bankers' DIY skills up to it?

Cows, cricket, and dangerous fences.

John Vickers, the man who has laid out the plans for a redesigned  Vickers Report recommended the separation of retail and commercial activities.

Last month, having digested Vickers’ recommendations, the Parliamentary Committee on Banking Standards published its own report, advocating the “electrification” of that ring fence.

Last week, John Vickers appeared in front of the Committee to endorse the proposal. “I welcome anything that reinforces the ring fence and, in particular, I welcome this committee’s proposal to that end,” he said.

“We are now 16 months on from publication of the final report, and nothing has happened in that period which makes me doubt that ring fencing is the right structural ingredient, along with others – loss absorbency and so on – for banking reform in the UK.”

At the time the Vickers Report was published, many in the banking industry were sceptical as to whether a fence could be erected at all. Senior bankers are not known for their DIY skills… And that was before any talk of passing a current through it.

However, the solution has become generally accepted as preferable to the Volker Rule that is currently causing panic on the other side of the pond. In order to avoid similarly draconian measures being adopted here, most bankers are keeping quiet.

But one committee member, Mark Garnier MP, wanted to make sure that Vickers had faith that bankers would resist the temptation to wield the wire cutters. “Is it inevitable that banks will try and test the limits of the ring fences?” he asked. “And is there a commercial advantage in doing so?”

In response, Vickers painted a surprisingly bucolic scene. “I can’t think about this topic without reference to my own experience, in a rural cricket match a long time ago,” he reminisced. “I was on the boundary, and there were cows in the next field.

“I didn’t realise how much power there could be in an electric fence until the ball whizzed past me and I went to get it.

“Having had that experience, I wouldn’t test the boundary. In fact, I’d try and field much closer in.”

A cautionary tale that I’m sure the UK banking industry will give full consideration to. But I have my own electric fence/cricketing anecdote.

At school, our cricket pitch was surrounded by an electric fence to stop errant woodland creatures defecating on the square. It may have been effective in that aim, but did not do a great deal to prevent errant schoolboys from weeing on it. And trust me, despite YouTube evidence to the contrary, it really didn’t do anyone much harm. Indeed, in those pre-mobile, pre-internet days it passed as entertainment.

I guess it really comes down to just how much current you pass down the wire, and whose hands are on the voltage dial. Those are going to be very difficult decisions to make indeed. As admirable as Vickers’ faith in humanity is, most of the investment bankers I know would look at an electric fence as little more than a potential practical joke.

The “electrification” of that ring fence. Photograph: Getty Images

James Ratcliff is Group Editor of  Cards and Payments at VRL Financial News.

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Article 50: Theresa May tries to charm the EU but danger lies ahead

As the Prime Minister adopts a more conciliatory stance, she risks becoming caught between party and country. 

She may have been a "reluctant" one but a Remainer Theresa May was. The Prime Minister's first mission was to reassure her viscerally anti-EU party that Brexit meant Brexit. Today, by invoking Article 50, she has proved true to her word.

In this new arena, it is not Britain that has "taken back control" but the EU. When Brussels drew up the divorce proceedings it did so with the intention of maximising its influence. The withdrawal deal that Britain reaches must be approved by at least 72 per cent of member states, representing 65 per cent of the EU’s population. The two-year deadline for leaving can only be extended by unanimous agreement. Even the much-maligned European Parliament has a vote.

While keeping her famously regicidal party on side, May must also charm her 27 EU counterparts. In her Commons statement on Article 50, she unmistakably sought to do so. The PM spoke repeatedly of a new "deep and special partnership" between Britain and the EU, consciously eschewing the language of divorce. In contrast to Donald Trump, who pines for the EU's collapse, May declared that "perhaps now more than ever, the world needs the liberal, democratic values of Europe" (prompting guffaws and jeers from Tim Farron's party and the opposition benches). Indeed, at times, her statement echoed her pro-Remain campaign speech. 

Having previously argued that "no deal is better than a bad deal", the Prime Minister entirely ignored the possibility of failure (though in her letter to the EU she warned that security cooperation "would be weakened" without an agreement). And, as she has done too rarely, May acknowledged "the 48 per cent" who voted Remain. "I know that this is a day of celebration for some and disappointment for others," she said. "The referendum last June was divisive at times. Not everyone shared the same point of view, or voted in the same way. The arguments on both side were passionate." 

Having repeatedly intoned that "we're going to make a success" of Brexit, May showed flashes of scepticism about the path ahead. She warned of negative "consequences" for the UK: "We know that we will lose influence over the rules that affect the European economy. We know that UK companies that trade with the EU will have to align with rules agreed by institutions of which we are no longer a part, just as we do in other overseas markets. We accept that." May also acknowledged that any deal would have to be followed by a "phased process of implementation" (otherwise known as transitional agreement) to prevent the UK falling over what the PM once called the "cliff-edge". 

In Brussels, such realism will be welcomed. Many diplomats have been stunned by the Brexiteers' Panglossian pronouncements, by their casual insults (think Boris Johnson's reckless war references). As the UK seeks to limit the negative "consequences" of a hard Brexit, it will need to foster far greater goodwill. Today, May embarked on that mission. But as the negotiations unfold, with the EU determined for the UK to settle a hefty divorce bill (circa £50bn) at the outset, the Prime Minister will find herself torn between party and country. Having delighted the Brexit-ultras to date, will she now risk alienating the Mail et al? The National Insurance debacle, which saw the government blink in the face of a small rebellion, was regarded by Remainers as an ominous precedent. May turned on the charm today but it will take far longer to erase the animosity and suspicion of the last nine months. 

George Eaton is political editor of the New Statesman.