A quirk of the political calendar means Monday sees both politicians and bankers learn of their possible future fate. For English MPs it is when they get embargoed copies of the Parliamentary Boundary Commission’s draft proposals, which get published on Tuesday. Monday is also the day when the Vickers Commission publishes its banking reform recommendations.
There is a widespread expectation in Whitehall that the Vickers Commission will recommend isolating retail banking from other banking activities, but without demanding that companies be split up. Internal firewalls and the like will be demanded instead.
It is also widely expected that the Vickers Commission will not demand its proposals are implemented promptly, either recommending more measured implementation or by staying a little vague on the matter. Arguments against rapid implementation that people have made include both the technical complexity of introducing changes and the hotly contested question of what the impact of rapid implementation might be on the economy. As the Financial Times has argued, it is not that hard to side-step the economic issue, making it “a poor reason to delay”.
But unless Vickers demands prompt implementation, the combination of the technical issues and the pressure from the banks means that implementation is likely to be pencilled in for several years away. That will present the government with a tricky political problem: how do you make a genuine intention to introduce a change in the future sound credibly different from a deliberate attempt to kick reform into the long grass? Perhaps Vince Cable at the height of his popularity would have been able to get away with a “trust me, I really mean it” approach but given the strength of public feeling on the matter (though not a strength of feeling that has actually motivated many people to switch their own bank accounts) that would be unlikely to work at the moment.
So it means the government is probably going to go for legislation as that would give much more substance to promises that change will indeed be coming. Moreover, the politics of this could turn out quite nicely. There is very strong pressure from parts of the financial system to minimise reform. Putting legislation through Parliament will see the Parliamentary pressure coming overwhelmingly in the opposite direction – for bigger, faster reform – providing the government with political support to see off the lobbying push. Indeed, we may well see the that the ironic outcome of the pressure from large parts of the banking sector to delay reform is to end up producing reform in which they have far less say than if it had been quicker and without Parliamentary legislation.