Lloyds chief in call to ‘ring-fence’ high street banks

The chief executive of Edinburgh-based Lloyds Banking Group has spoken out about the need to separate high street and investment banking.

Throwing his support behind the principle of ‘ring-fencing’ retail banking deposits, Antonio Horta-Osorio said such a move was vital to the effort of making the banking sector work for the benefit of the economy as a whole.

The stance is in stark contrast to that taken earlier this month by former Barclays chairman Sir David Walker who said ring-fencing “would irrevocably damage” the UK banking system.

Addressing the British Bankers Association’s annual conference yesterday, Mr Horta-Osorio said: “To people who say ring-fencing is too burdensome, I would simply say that having an effective ring fence can, over time, reduce the level of capital required in the banking sector.”

He also went further as he outlined the need to supplement the so-called ‘firewall’ between high-street and ‘casino’ banking with tougher capital rules, improved liquidity and better regulation to insulate the taxpayer from the effects of any excessive investment banking practices.

The Lloyds boss also used the address to publically state his support for the government’s drip-drip method of further reducing its stake in the lender.

Earlier this month UK Chancellor George Osborne said the Government would this year further reduce from about 25 per cent to 18 per cent, its Lloyds stake, which had stood at 43 per cent at the time of its bailout.

Commenting on the strategy, Mr Horta-Osorio said: “I personally think that the dribble-out was a really smart thing to do because it enabled the government to sell without any concerns about inside information.”

He added: “It’s just a blind programme where they sell 15 per cent, on average, of daily trading volumes.”