David Prosser: Banks set to count the cost of even themost modest reforms

Outlook Four days and counting to nemesis for Britain's banks, with Sir John Vickers due to unveil the preliminary findings of his Independent Commission on Banking on Monday. Actually, nemesis might be pushing it – all the indications are currently that Sir John does not intend to recommend some of the seismic shifts campaigned for in certain quarters, most notably the separation of retail and investment banking. Still, do not underestimate the impact even quite modest reforms might have on Britain's banks.

A note published by analysts from Société Générale yesterday computed the cost to the biggest banks of Sir John pushing forbetter competition in the current account market. That seems asensible area on which to focus, given the Commission's brief to look into improving competition as well as financial stability, where reforms may be more difficult.

Overall, the Commission could cost the high street banks as much as £2bn just by requiring clearer charging information and easier switching, SocGen reckons. Lloyds Banking Group, the market leader on current accounts by some distance, would be in for £600m of that, but its rivals would also face bills running into hundreds of millions of pounds, the study reckons.

It would certainly be ironic were Lloyds to end up taking the biggest hit from this Commission, given its lack of exposure to investment banking, on which the debate has focused since the financial crisis. But it is difficult to argue with those who complain about the lack of transparency on current account charges, or the barriers to switching provider.

Still, while Sir John is right to want to tackle those problems, one might describe such solutions as demand-focused – if current account customers were given more reason to switch provider and doing so was easier, demand for rival products ought to rise. But what about the supply side?

The biggest problem in thecurrent account market is how to encourage new entrants to offer more products that it would be worth switching to should customers decide to dump one of the dominant players. The free banking model, where customers who remain in credit – the majority – are subsidised by those in the red, authorised or not, is not one that is conducive to new entrants of any scale. It simply takes too long – and the losses in the interim are too high – to develop a customer profile that turns a profit.

Finally, don't think stability-driven reforms are off the agenda completely. The smart money now seems to be "operational subsidiarisation", a ghastly way of describing an enforced internal separation between retail and investment banking. That falls short of a full-scale break-up of "too big to fail" banks, but would come with costs – £1bn alone for Barclays according to a Cannacord analyst yesterday.