Bob Diamond, the chief executive of Barclays, Stephen Hester, chief executive of Royal Bank of Scotland, the chairman of HSBC, Douglas Flint and António Horta-Osório, the newly appointed chief executive of Lloyds, each addressed the Treasury Select Committee.
Stephen Hester of Royal Bank of Scotland warned that the value of the taxpayer's 84% stake in the bank could be reduced due to the proposals of the Independent Commission on Banking (ICB), which aims to "ring-fence" retail operations.
Mr Hester said: "I think if we went down that route there will be greater costs, and those costs would be divided between shareholders, customers and the economy as a whole”.
He also spoke of the "moral hazard" of ring-fencing high street operations away from a financial institution's riskier investment banking operations, which he said could "create a protected beast that the government will support”.
Douglas Flint, chairman of HSBC, took a more positive approach by presenting proposals of how ring-fencing could be achieved to the Treasury.
However, chief executive of Barclays, Bob Diamond, warned that plans to ring-fence retail banking could make an implicit state guarantee for banks "explicit".
António Horta-Osório, the new boss of Lloyds Banking Group, seemed to be in favour of ring-fencing, saying that the advantages "reduced the complexity" of banks.
The idea for ring-fencing was initially made in the ICB's interim report published in April. The report suggested the UK retail banking businesses of large banks should be put into separate units, making them isolated from the rest of a bank incase of an event where the lender got into trouble.
Following his warning to banks over the level of lending, Mr Cable has since been accused by the Unite union of issuing "empty threats" to put a tougher stance on tax on banks if they did not meet their target to lend £190bn to SMEs.
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