The prospect of Britain's banks needing to hold more capital to protect retail banking operations has put pressure on their share prices today, even though the threat of a radical overhaul has eased.
The head of a special commission tasked with reviewing the structure and operation of Britain's banks said at the weekend the banks might need extra capital for their retail operations, but that possible reforms to the sector were unlikely to include a complete break-up of the big integrated banks.
John Vickers, the head of Britain's Independent Commission on Banking (ICB), said he favoured 'ring-fencing' retail banking operations, so that depositors' funds aren't used to subsidise more risky investment-banking activities.
Analysts say radical changes could be expensive for Barclays, Royal Bank of Scotland and other universal banks, which combine retail and investment banking.
The ICB is not due to make recommendations to the government until September.
Today, shares in UK banks were down, in general, on foot of the announcement.
See how UK banks' shares are faring.
Meanwhile, Barclays' new boss is to overhaul the way bonuses are paid next month by giving senior staff loan notes that are dependent on the success of the bank, according to a report today.
Chief executive Bob Diamond is considering paying a large proportion of bonuses in special contingent convertible bonds - also known as 'cocos' - that are effectively worthless if the bank runs into trouble, the Financial Times said.
Issuing cocos would incentivise staff to ensure the bank is run in a sustainable way and would give the bank extra stability in times of stress, it was claimed.
The UK Treasury's negotiations with the UK's biggest banks to hammer out an agreement on bonus payments and levels of lending to small businesses have stalled, and no agreement is now expected this week.
