UK's Vickers sees case for form of bank separation

LONDON, Jan 22 (Reuters) - Separating different banking activities and their various capital requirements could reduce the danger of banks failing, the head of a government-backed body probing possible reform of the sector said on Saturday. Britain set up the Independent Commission on Banking (ICB) last year to examine possible changes to the sector following the credit crisis, which saw top banks such as Royal Bank of Scotland and Lloyds needing bailouts. John Vickers, who heads the ICB body, told a business conference that the ICB was still examining the possibility of splitting banks' retail and investment banking businesses. "If the probability and/or impact of bank failure, particularly of retail service provision, can be reduced by forms of separation between banking activities, then so too might capital requirements," Vickers said. "If so, the case for structural reform might be greater, the higher is the cost of bank capital." However, Vickers added that the ICB was unlikely to support banks with narrow business models, although it would still examine this issue. "While the ICB is unlikely to favour radical forms of narrow or limited purpose banking, their aims deserve recognition," he said. (Reporting by Sudip Kar-Gupta; Editing by Peter Griffiths) Keywords: BRITAIN BANKS/ (; +44 207 542 9795; Reuters COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved.

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