Lloyds share price: CEO backs ring-fencing

on Jun 18, 2015
Updated: Oct 21, 2019

Lloyds’ (LON:LLOY) chief executive, António Horta-Osório, has called on the banking industry to accept upcoming ring-fencing rules, which oblige lenders to separate their retail operations from investment banking activities.

Speaking at the British Bankers’ Association (BBA) retail banking conference in London today, Horta-Osorio said that ring-fencing is a key element of ensuring that the banking sector can give strong support to the wider economy. “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 stated. Lloyd’s boss added that that ring-fencing together with tougher capital rules, improves liquidity and that along with better regulation will ensure safer banks that are less likely to be a burden for the British taxpayer in the case of failure.
Horta-Osório’s comments came in the face of opposition from other blue-chip lenders such as HSBC (LON:HSBA) and Barclays (LON:BARC). According to the rival banks, the ring-fencing rules that are due to come into force in 2019 will make banking in the UK more expensive than other global financial centres and could lead to British lenders moving overseas. Competitors have slammed Lloyds for its defence of the regulatory proposals, as the taxpayer-backed bank has a very small investment banking unit in comparison to its UK rivals. Thus Lloyd’s will be largely unaffected by having to ring-fence its operations.
In his speech today, Horta-Osorio also said that Lloyds’ return to full private ownership was “within sight”. The government has reduced its stake in the bank, bailed out during the 2007-9 financial crisis, to 18 percent from 43 percent. The rate of its sell-down has accelerated this year after Morgan Stanley was mandated to sell shares through a trading plan known as a “dribble-out”.
“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,” Horta-Osorio said. “It’s just a blind programme where they sell 15 percent on average of daily volumes and they have increased the number of shares sold at higher prices without discounts,” he added.
Lloyds’ stock has been trading in negative territory so far today. As of 10:22 BST, shares in the FTSE 100-listed lender were changing hands at 85.87p – 0.60 percent down intraday.
As of 10:43 BST, Thursday, 18 June, Lloyds Banking Group share price is 85.75p.

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