Sir John Vickers to chair banking commission

The Independent Commission on Banking will formulate policy recommendations with a view to:

• Reducing systemic risk in the banking sector, exploring the risk posed by banks of different size, scale and function;
• Mitigating moral hazard in the banking system;
• Reducing both the likelihood and impact of firm failure; and
• Promoting competition in both retail and investment banking with a view to ensuring that the needs of banks' customers and clients are efficiently served, and in particular considering the extent to which large banks gain competitive advantage from being perceived as too big to fail.

The Commission will make recommendations covering:

• Structural measures to reform the banking system and promote stability and competition, including the complex issue of separating retail and investment banking functions; and
• Related non-structural measures to promote stability and competition in banking for the benefit of consumers and businesses.

The Commission will also have regard to the Government's wider goals of financial stability and creating an efficient, open, robust and diverse banking sector, with specific attention paid to the potential impact of its recommendations on:

• Financial stability;
• Lending to UK consumers and businesses and the pace of economic recovery;
• Consumer choice;
• The competitiveness of the UK financial and professional services sectors and the wider UK economy; and
• Risks to the fiscal position of the Government

The Government will announce the full membership of the Independent Commission shortly, which will require a well-balanced set of skills and experience, covering banking, business, competition, consumer issues and regulation.

The Commission will produce a final report by the end of September 2011. The Commission will report to the Cabinet Committee on Banking, chaired by the Chancellor of the Exchequer George Osborne, with Secretary of State for Business, Innovation and Skills Vince Cable as Deputy Chair.

Chancellor of the Exchequer George Osborne, said: "The worst financial crisis in living memory highlighted the significant detrimental impact that failure in the financial sector can have on the real economy and the public finances. We need a proper debate about the future structure of banks, the relationship between retail and investment banking, and the question of how to ensure greater competition in the banking industry. The Coalition Government will deliver on its promise to establish an independent Commission on Banking and I am delighted to announce that Sir John Vickers will chair the commission. He has the experience, integrity and independence required to lead this debate."

Banks are fully committed to regulatory reform and to working with the Independent Banking Commission to ensure control of the banking industry is effective. Commenting, chief executive of the BBA, Angela Knight, said: "We welcome Sir John Vickers to his post heading up the Independent Banking Commission at this critical time for the banking industry and global economic recovery.

"We are facing unprecedented change and the work of the Independent Banking Commission will play a key role in reshaping the structure of banking regulation in the UK. The industry also looks forward to working with Sir John to ensure change is implemented efficiently and effectively and that transition between regulatory authorities does not cause disruption to the financial system.

"We will work with the government on this and all other banking and business issues. The UK has moved further and faster than other major economies on banking reform. We urge the government to ensure all changes take account of the international reform agenda."