Winters named on UK Banking Commission

Former JP Morgan investment bank co-chief is one of five to decide on the future of UK banking

Bill Winters, formerly co-chief executive of JP Morgan's investment bank and a veteran of the credit derivatives market, will be one of five members of the UK Banking Commission, UK chancellor George Osborne announced last night.

The commission will report next year on how to restructure the banking industry to reduce systemic risk, including whether UK banks should be reduced in size in order to increase competition, or broken up into retail and investment banks.

The commission's chairman will be John Vickers, the Warden of All Souls College in Oxford, and formerly president of the Royal Economic Society, chief economist of the Bank of England and chairman of the Office of Fair Trading. Also on the committee are Claire Spottiswoode, formerly head of the UK gas regulator Ofgas, Martin Taylor, formerly chief executive of Barclays, and Martin Wolf, a writer for the Financial Times.

Some of the commission's members are already on record as backing limits on size or a split between investment and retail banking. In a column in January, Wolf said a split would be "desirable" as it would block banks from exploiting their retail guarantees to make "speculative investments of little economic benefit". However, he questioned how easy it would be to distinguish between retail and investment activities, and whether such a split would alone be enough to stabilise the financial sector.

Spottiswoode is also likely to back some form of break-up, as well as size caps. She sat on the Future of Banking Commission organised earlier this year by consumer magazine Which?, whose report, released earlier this month, concluded: "The compulsory separation of banking activities has the potential to solve many current and persistent problems, and the government's new commission should consider urgently and in great detail a structural solution to the problems caused by large, integrated banks."

Taylor, although not a member of the Future of Banking Commission, testified before it on March 15. He told the commission there was much to say in favour of a split: "The investment banking activities of a universal bank were at all times parasitic on the retail bank balance sheet... I think there are serious dangers, and if you are going to have universal banks, you'd better be sure you regulate them very carefully and very hard."

He added that not all investment banking activities had social value, and had, when combined with excess leverage, put entire banks at risk.

The British Bankers' Association (BBA) argued in response to the commission that the separation between investment and retail banking would in practice be impossible: "It is a fallacy to believe that in the modern economy in which people benefit from a range of financial services, ‘utility banking' can be separated from ‘investment banking' and still meet the needs of retail and business customers," it said.

BBA chief executive Angela Knight added today: "It is clear other countries are in favour of universal banks and in the crisis they have been the most stable, with the so-called narrow banks being the ones that failed most. A modern economy requires banks of all types and sizes. Breaking banks up here would quickly be felt by individuals and companies that would pay more for their mortgages and finance."