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The Independent Banking Commission (Vickers) Report: squaring the circle?

Saptarshi Ghosh (School of Law, Brunel University, London, UK)
Swetketu Patnaik (Management School, University of Liverpool, Liverpool, UK)

International Journal of Law and Management

ISSN: 1754-243X

Article publication date: 16 March 2012



The Independent Banking Commission (Vickers) Report is not only one of the most significant developments in the banking regulatory and supervisory context in the UK in recent times but is also one that would considerably impact banking and capital markets functions and trends in this decade. The purposes of this paper are two‐fold: to analyse the interim Vickers Report within the larger paradigm of the prudential banking regulatory approach in the UK, particularly in the context of the debate of bailing out banks that are too‐big‐to‐fail; and to critically examine the recommendation of the Report in the context of the failure of Northern Rock in 2007. The central focus of the paper is to analyse the probable impact and shortcomings of the key recommendation of the Vickers Report, i.e. requirement to hold an additional capital buffer in order to separately ring‐fence retail functions and retail deposits of universal banks and financial institutions operating in the UK.


The method used is a combination of legal examination and case‐study based analysis. This paper sees the failure of Northern Rock as essentially a consequence of supervisory lapses by the FSA and raises relevant critical questions as to the efficacy of the recommendation of the Vickers Report in the context of such supervisory lapses and failures. While relying primarily on official publications in the public domain, journal articles, academic writings, and, newspaper articles, this paper explores the related regulatory and financial implications of the Vickers Report recommendation in the backdrop of the banking crisis in the UK.


The paper concludes that the key recommendation of the Vickers Report, to ring‐fence retail functions universal banks operating in the UK, goes only mid‐way in securing the twin objectives of stability and safety that the Report has set out to achieve.

Research limitations/implications

The present Report is an interim one and the final version of the Report is expected in September. Further, various oversight reports and recommendations by the FSA and other bodies are expected as a follow‐up to the final Report. The key recommendation of the requirement for universal banks operating in the UK to hold additional capital for ring‐fencing their retail functions and deposits is not expected to undergo any substantial modification or revision in the final Report.


This paper is of immense significance to bankers, supervisors, lawyers, auditors, consultants, researchers, jurists, and, those engaged in or with various issues and sectors in financial and banking regulation.



Ghosh, S. and Patnaik, S. (2012), "The Independent Banking Commission (Vickers) Report: squaring the circle?", International Journal of Law and Management, Vol. 54 No. 2, pp. 141-152.



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