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The UK and Multi-level Financial RegulationFrom Post-crisis Reform to Brexit$
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Scott James and Lucia Quaglia

Print publication date: 2020

Print ISBN-13: 9780198828952

Published to Oxford Scholarship Online: February 2020

DOI: 10.1093/oso/9780198828952.001.0001

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Sitting on the Fence: Bank Structural Reforms

Sitting on the Fence: Bank Structural Reforms

Chapter:
(p.91) 6 Sitting on the Fence: Bank Structural Reforms
Source:
The UK and Multi-level Financial Regulation
Author(s):

Scott James

Lucia Quaglia

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198828952.003.0006

The main driver of new, stringent rules on bank structure was not pressure from elected officials, as the two largest UK political parties were ambiguous about the benefits of separating retail and investment banking. Instead, we argue that regulators in the Bank of England pushed strongly for ‘ring-fencing’ to address moral hazard concerns caused by too-big-to-fail banks. Despite fierce opposition from the financial industry, regulators were determined to trade up rules by actively cultivating political support through the Independent Commission on Banking (ICB) and in Parliament. At the international and EU levels, UK regulators acted as fence-sitters on banking reform for two reasons. First, unilateral reform by the US meant that it was not possible to push for an international solution with its traditional ally. Second, resistance to major structural reforms amongst several member states limited the scope for harmonization across the EU.

Keywords:   bank structure, ring-fencing, too big to fail, structural separation, retail banks, investment banks

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