Probe to calm fears of bank exodus from City
The government's banking commission will next week deliver a robust rebuttal to claims that tighter regulation will spur a costly exodus from the Square Mile.
Threats: Barclays, HSBC and Standard Chartered could quit the UK if the clampdown is too onerous
In a keenly-anticipated report, the Independent Commission on Banking will on Monday outline a raft of far-reaching proposals designed to safeguard the broader economy from future ructions in the financial sector.
These are expected to include a recommendation that banks 'ring-fence' consumer savings and deposits from their high-risk investment banking divisions.
The sweeping measures are aimed at ensuring taxpayers won't have to bail out British banks in the event of a re-run of the 2008 crash.
Barclays, Standard Chartered and HSBC have all threatened to quit the UK if the impending clampdown is too onerous, arguing that their departure would damage the City's standing and cost the taxman dear.
But the ICB is expected to undercut these arguments, setting out the benefits of having a large financial sector based in the UK against the potential costs of future bail-outs.
One high-level source told the Mail: 'A lot of the bank's claims are exaggerated. The commission will shine a light on their threats and add substance and analysis to the debate.'
Including foreign subsidiaries of overseas banks, the financial sector paid £5.6bn in corporation tax in the 2009-10 - or 16% of the total. Counting income and bonus taxes, the financial industry handed the taxman a total of £53.4bn that year.
But the commission is likely to stress that the banking industry enjoys highly valuable protection from the taxpayer - particularly during periods of crisis.
Nearly £1 trillion of government support was provided to the banking industry in 2008 and 2009. In addition, British banks continue to operate with an implicit guarantee from the taxpayer, which drives down their cost of borrowing money and boosts profits.
It is understood that the ICB will put a price on this unwritten insurance, which is worth £50bn to the UK-based banks every year, according to Bank of England calculations.
The ICB, which declined to comment, is understood to have ruled out a reversal of the 2008 merger of Lloyds TSB and HBOS, which has reduced competition in High Street banking.
But it is expected to recommend a radical shake-out in retail banking by making it easier for customers to compare the true cost of current accounts and switch between banks.
Following a three-month consultation, the ICB will deliver its final recommendations to the Chancellor in the spring.
16% Financial sector's share of total corporation tax receipts
£1 trillion Taxpayer support given to banking system during 2008 crisis
£5.6bn Corporation tax paid by financial companies in UK
£53.4bn Industry's total pay-out to Exchequer, including pay-roll taxes
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