DEBT FINANCING. United Kingdom to move forward with reform of Bank

London (Reuters)-Britain banks face some of the world's toughest regulations in the framework of the reforms outlined on Monday, involving the isolate its retail lending activities and store up to billion in extra capital at a cost of up to 7 billion pounds (US $ 11 billion).
Chancellor (Finance Minister) George Osborne said that he would have legislation on the basis of the proposals, intended to prevent a repeat of the financial crisis that led to two biggest creditors of Britain, Lloyds and Royal Bank of Scotland, being rescued with massive injections of government money.
"We're getting right up there with the Switzerland in terms of having the capital regime more costly," said Jane Coffey, a Fund Manager Royal London Asset Management. "It cannot restore the confidence of shareholders, but it will restore confidence to the holders of securities".
In its final report, the independent Commission on Banking (ICB) insisted banks own funds waiting at least 10% in its retail operations in the internal market.
He also set a reference that is larger than the other reforms with European banks a main requirement to absorb capital loss of between 17% and 20%-a level that only the Swiss also plan to introduce.
By comparison, new global regulation due to enter into force in 2019 asks banks to maintain a minimum of 7 percent in the capital of quality, or a percentage of most likely 9.5.
The ICB estimated gross annual cost of his proposals for banks of Great Britain in between 4 billion pounds and 7 billion and recommended that the reforms are completed until 2019, to take into account the current economic climate.
The British Government supported the report, saying it would help boost the economy and protect taxpayers.
"John Vickers (ICB) itself sets out a timetable and plan to stay with your calendar. So he says let's have all changes on the site until the end of this decade, "said Finance Minister Osborne.
"There are many changes involved, that is why it will take some time, but we will pass legislation in Parliament," he added.
Britain's banks form a powerful lobby group since financial services are estimated to contribute about 10 per cent for the economy of the United Kingdom.
"Big four" banks of Great Britain-Barclays and HSBC, as well as Lloyds and RBS-fought against excessively difficult new EU regulation and global reforms that will force them to raise capital.
"Banking industry ... is a very important component to the United Kingdom more than other countries, which is why the gold coating which regulatory regime is being implemented globally should be reasonable and not push us into a corner where the banking industry here is uncompetitive," said David Miller, Cheviot Asset Management Fund Manager.
REAL CONCERNS
The proposals will limit the extent to which a bank may use the money in its retail arm, to finance activities, thereby increasing its financing costs, which will probably hit their profits and possibly make it harder to borrow for investment banking firms.
"There are real concerns that empowerment can limit the ability of banks to grant loans to small businesses," said John Longworth, Director General of the British Chambers of Commerce.
Shares in Barclays, Lloyds and RBS lost 4.8 per cent, while HSBC shed 1.6 percent, echoing losses throughout Europe. The largest European banks index fell from 3.8%.
As anticipated, the ICB wants banks to place a "wrap" around their retail banking operations of the nucleus. Consumer small business deposits and loans must be within the cordon, but banks will have some flexibility on what else should be included.
Between 1 trillion pounds and 2 trillion worth of assets is likely to be held within the sealing ring.
British banks have total assets of £ 6 billion, four times the size of the GDP of the United Kingdom. Two of them-the Royal Bank of Scotland and Lloyds-had to be partially nationalised after the financial crisis and a third, Northern Rock, was fully nationalised.
Thus the Government, which now has holdings of 83% and 41% in the RBS and Lloyds respectively, configure the ICB last year to seek ways to ensure taxpayers do not have to bail out any more banks should occur future crises.
The British Bankers ' Association "any other reform measures approved by the UK authorities need to be carefully analysed and compared with those agreed internationally," he said.
"It is vital that the full impact of any new reforms will have on the economy, recovery and capacity of banks to support their customers in the United Kingdom is understood."
Others suggest that the proposals do not take into account any problems in retail operations.
"What we must bear in mind is that the problems that have occurred two or three years ago-Northern Rock, Alliance and Leicester, Bradford and Bingley-were not the result of investment banks, they were actually the result of problems in the retail banks," said Antony Thomson, President of Metro Bank.
"I don't know that retail bank empowerment will be a cure that everyone thinks can be."
(US $ 1 = 0.629 pound)

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