Break Up

The break-up of Britain’s biggest banks is back on the agenda following the release of a significant cross party review this week.

The Future of Banking Commission is suggesting the Government take serious heed of its advice to separate the investment banking and retail arms of British banks.

According to comments made by the now Secretary of State for Business Innovation and Skills, Vince Cable, and who was active on the FBC, the ‘clear direction’ in which the Government is moving is set it’s just a matter of what structure it is within.

The commission was set up by consumer group Which? and is chaired by Conservative MP David Davis.

The FBC’s 84 page report opens with comments from Davis, who is quoted as follows:

“In 2010, Britain is emerging from the worst financial crisis of our lifetimes, a manifestation of a deep-rooted and persistent set of problems. Banking is a structurally flawed industry that has failed its customers, its investors, and the taxpayers who stand behind it.”

With this basic assumption it is no surprise that the findings and subsequent recommendations of the FBC are far reaching and significant.

The question now is can and does the new coalition government have the stomach to take on board and push through such major reforms at this sensitive juncture and with so much else to occupy its focus?

The FBC’s main recommendations include the following:

A publicly accessible “will” for bank, revealing how they would avoid a taxpayer bailout in the event of getting into trouble.

• A new class of 100 per cent guaranteed deposit that promises to invest only in safe assets such as Government bonds.
• Urgent consideration to be given to breaking investment banking businesses from their retail arms.
• Breaking up investment banks so that their securities trading desks are separate from their corporate advisory businesses.
• All derivatives trading to be disclosed and restricted to publicly listed derivatives.
• More powers for a consumer regulator to promote competition between banks.
• A “prudential regulator” with powers to restructure a bank where it is seen as too big to fail.
• A powerful “systemic risk” regulator with the power to damp down unsustainable asset price bubbles.