So the ICB report is out and we can now say for sure that the Positive Money submission for real banking reform was not actioned in any way.
It is clear to me from the final report that it is really a game of trying to please banks and submit to their threats of crashing the UK economy and trying to please the public by showing some kind of action.
I like the fact that there is some banking reform, unfortunately it is an expensive experiment that will not prevent the upcoming crash I forecasted in my YouTube video "The Great Depression of 2013".
Here is a summary of the report:
- Ring-fencing is here and banks must separate domestic retail banking from global wholesale/investment banking.
- The commission is not clear whether banking for large companies should be in or outside the ring-fence
- The ring-fenced part of the bank should have its own board and be legally and operationally separate from the parent bank.
- Ring-fenced banks should have a capital cushion of up to 20% comprising equity of 10%, with an extra amount of other capital such as bonds.
- Capital could be moved from the ring-fenced bank to the investment bank, as long as the capital ratio of the ring-fenced bank did not fall below the 10% minimum.
- It should be easier to switch bank accounts and the ICB recommends "the early introduction" of a system that makes it easier to move accounts that is "free of risk and cost to customers".
- The industry should be referred for a competition investigation in 2015.
In my upcoming book 'Bank To The Future: How You Can Boom When Banks Go Bust & The One Investment Everybody Needs To Make", I recommended the three commandment of banking reform based on the Positive Money submission:
1. Thou shalt make the banks ask depositors permission before they lend.
2. Thou shalt make the banks disclose to the depositors how they use their money.
3. Thou shalt give the license to create money to a democratic power.
So how did the ICB Vickers Report do?
Ring fencing goes a tiny way to actioning the second commandment on disclosure, but only a tiny way.
And that is about it.
The bank still becomes the legal owner of your money when you deposit money with them, they can still use that money for whatever they wish and they can still use it as collateral to create money.
So my forecast for the banking crash still stands.
The problem with requiring banks to hold additional reserves is as follows:
Without an alternative monetary system, requiring banks to increase their reserves only results in a reduction in the economies money supply leading to a recession and further unemployment as they replace staff with technology to cut costs, but with no more stability.
We still have more debt than money in our economy, we still need to increase debt in order to move out of the recession and any increase in reserves still leads to a decrease in the money supply in our economy.
The funny thing is, these reforms will cost just as much as real reforms and the problem will still remain.
I like the recommendations to encourage competition, but I want that competition to come from a full reserve bank.
In case you did not see it, here is my forecast ahead.
Follow Simon Dixon on Twitter: www.twitter.com/SimonDixonTwitt