Vickers: UK should avoid Volcker rule

The chairman of Britain’s Independent Commission on Banking said the UK should not implement a Volcker-like rule as it is too difficult to police alongside the country's planned banking legislation.

Adding the Volcker rule, in addition to a ring-fence separating UK banks’ core retail operations from riskier investment activities (including loans to private equity firms) should be avoided according to John Vickers, the chairman of Britain’s Independent Commission on Banking.

The suggested ring-fence, which UK Treasury hopes to implement by 2019, is based on Vickers’ 2011 report.

Giving evidence to the UK’s Parliamentary Commission on Banking Standards Vickers said there would not be enough regulatory capacity to police both. The Volcker rule restricts US banks from trading off their own accounts as well as limiting their investments in private funds to no more than 3 percent of any one fund’s capital. 

“If one had ring fencing and Volcker there would be two boundaries to police,” Vickers said, adding the rule “draws the line in a very difficult, almost excruciatingly difficult place”.

Industry sources expect a final draft of the rule sometime this quarter. Many cited the rules’ complexity as cause for the delay, which has resulted in concerns for banks who must comply with the rule by 2014.