Afternoon markets: Banks drop as Osborne responds to Vickers report

British banks were among the biggest fallers at the close of trading as chancellor George Osborne delivered the government’s reposnse to the Independent Commission on Banking’s report.

The so-called Vickers report set out plans to restructure the banking sector in the UK, with full reform expected by 2019.

Osborne says UK banks will be required to hold more capital than demanded under the Basel III rules. Under the proposals depositors will become preferred creditors ahead of unsecured lenders. The chancellor says total costs to UK banks are expected to be between £3.5 billion and £8 billion.

The news saw British banks dominate the bottom five fallers in the FTSE 100 index – which closed down slightly at the end of trading – led by Lloyds Banking Group.

Lloyds saw its share price drop by 4.2% to 23.46p, while Barclays fell 3.2% to 165.95p. Royal Bank of Scotland Group – which has been told to shrink its investment banking business – saw its share price drop by 3% to 19.4p.

Other fallers included Vedanta Resources, down 3.6% to 1,046p, and listed hedge fund Man Group, which dropped 2% to 123.8p.

The biggest riser at the end of the afternoon was biopharmaceutical company Shire, which was up 1.9% to 2,150p. Temporary power provider Aggreko climbed 1.7% higher to 1,848p.

Holiday Inn owner Intercontinental Hotels Group and Unilever both rose 1.4% to 1,082p and 2,096p, respectively. Elsewhere, Imperial Tobacco Group climbed 1.3% higher to 2,355p.

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