It’s now just a few days until the Independent Commission on Banking (ICB) publishes their eagerly awaited recommendations for UK banking reform.

April’s interim report gave us a feel for what to expect but, (as was probably intended) it raised more questions than answered.

The critical aspects of timing, and when the measures will come into force was not dealt with – could there be another SEPA end-date fiasco? I hope not. The banks are, of course, lobbying for ‘the later the better’.

2019 has been mentioned in the press – it would be sufficiently far off to ignore the problem for now and hope that something happens in the meantime to make it all go away. Having said that, the timeline may be driven by an implicit dependency on the implementation of the Basel III agreement. Its higher minimum capital requirements are due to be implemented in 2015.

As for the reforms themselves, they are planned to cover:

• capital requirements and banks’ ability to absorb losses
• structural reform
• competition

Without going into them all, it seems that large UK retail banks are certain to have their capital requirements made more stringent than the 7% ratio of ‘equity-to-risk-weighted-assets’ proposed in the Basel III agreement. We can probably expect something more like a 10% limit.

On the investment banking side, the commission is also recommending an increase to 10% for those banks deemed to be ‘systemically important’, although this would require international consensus before being required by law.

It looks inevitable that for international banks, their UK retail banking operation will be split from their wholesale and investment divisions into a separately capitalised subsidiary. This is being referred to as a ‘retail ring-fence’. Apart from changing the legal structure of the bank itself (the necessity of which will largely depend on its existing structure), this has potential implications for all of the bank’s support functions, such as operations, IT, treasury, risk and finance.

As for how much these reforms will cost; as the report says, it will ‘require careful examination’. The first salvo from the banks was to commission a report from consultants Oliver Wyman which estimated the annual costs of subsidiarisation to be between £12 – £15 Bn. This is principally driven by the limitations in their ability to move capital around the organisation and the need for multiple sources of funding.

So what happens next?

Once the recommendations are made, it is then down to the government to decide which it will implement. So, while we can certainly expect more debate, hopefully some of our questions will be answered on Monday.