Lloyds Share News (LLOY)

* Vickers calls for ring-fence "electrification" * Points out need for plan to withstand legal challenge * Says banks overstate difficulties of central IT platform By Matt Scuffham LONDON, Jan 16 (Reuters) - Britain's plans to make banksring-fence their retail operations from riskier areas has abetter chance of succeeding if a threat of full separation is inplace, the architect of the ring-fencing plan said. The Independent Commission on Banking, headed by JohnVickers, had recommended that UK banks shield retail operationsfrom investment banking activities to help to avoid furthertaxpayer bailouts, but it stopped short of advocating totalseparation. Britain was forced into a 65 billion pound ($105 billion)double rescue of Lloyds Banking Group and Royal Bank ofScotland in 2008. Speaking to an influential panel of lawmakers on Wednesday,Vickers backed plans for the "electrification" of thering-fence, enabling Britain's financial regulator to imposefull separation if banks try to find ways around it. "There is no cast-iron guarantee of any structuralarrangement working effectively indefinitely without the rightincentives and the right vigilance," Vickers told theParliamentary Commission on Banking Standards. "The proposals for electrification, I believe, would furtherreinforce the chance of ring-fencing working." The banking standards commission has recommended thatBritain's financial regulator be granted a "reserve power"enabling it to step in if banks are abusing the spirit of thering-fence. "I believe ring-fencing will work without reserve power, butthere is an even higher likelihood of it working with thereserve power," Vickers said, adding that the proposal wouldneed to be strong enough to stand up to legal challenge. The commission is also considering recommending a radicaloverhaul of banks' IT systems with the creation of a central ITplatform that would enable customers to retain their accountdetails when they switch banks, thereby encouraging competition. Banks oppose the plan, saying that it would be too expensiveand complicated to implement. "I suspect that those in the industry overstate thedifficulties of getting to such a place, but it would clearly bea pretty costly exercise," Vickers said.