RBS: Ring-fencing will increase risks
Thursday 9 June 2011 - by Andrew Hickley
Ring-fencing the activities of UK banks will increase systemic risk and moral hazard, according to the chief executive officer of RBS.
Ring-fencing the activities of investment vehicles used by banks would make these more volatile because they would not have this same support, Hester added.
Barclays chief executive, Bob Diamond, also spoke in front of the panel, arguing the move would make a state guarantee "explicit".
The ICB has recommended that banks' retail and so-called casino operations are separated, saying it would make it easier to resolve banks that get into trouble.
Diamond also voiced his support for the use of living wills, which he said Barclays had already invested £30m (€33.7m/$49.3m) in preparing.
This resolution and recovery plan would be able to be tested between September and March, he said.
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