Among UK’s Top Banks, Barclays is most at risk due to government appointed commission’s recommendation to banks to protect ordinary savers from investing in risky investments. According to a recent survey conducted among fund managers and other investment bankers; Barclays will be affected more than any other bank if the above reform will be implemented by the UK Government.
This “ring-fencing” model is presented with an aim to protect ordinary savers’ from the failure of company’s investment bank. This reform also ensures that a bank’s utility function – Money transfers and other small business operations will continue despite having above scenario. However, a much higher cost of implementation this reform would be borne by investment banks or banks like Barclays having large investment divisions.
Analysts also say that major players of UK banking industry who might be affected in some way due to Commission’s reform, are Barclays, Royal Bank of Scotland, Lloyds, HSBC and Standard Chartered. However, the majority of the analysts expressed that Barclays faced the biggest possible hit, in terms of higher capital cost on its BarCap Investment banking operation.
On account of the ICB’s recommendation, a high degree a separation, the market will act negatively due to cost involved. An increase in funding cost would become necessary.