Ring fencing of UK banks called into question

Sir David Walker, a leader in bank governance circles and ex Barclays chairman, wrote in the Telegraph this week regarding the limitations and potential pitfalls of bank ring-fencing.  Bank ring-fencing, in this context, is the separation of retail banking from other banking operations and ensure each can fully function independent of the other.  Walker argues effectively that there is an urgent need to review the plans for ring-fencing and fully consider the consequences of such actions, adding that such plans in the UK could "irrevocably damage its banking system".   

The Telegraph estimates that the ring-fencing may cost up to £4 billion annually to operate while S&P indicated last year that implementation of such plans would turn the rump investment arms of the ring-fenced banks to Junk, driving up borrowing costs for those entities. Walker's key argument is that the facts have now changed for the pro ring-fencing camp, with other prudential changes with respect to capital, leverage, and resolution eclipsing the need for such measures.