The case for bank break up remains intact

Posted on September 12 2011

The Vickers report is suggesting bank ring-fencing this morning.

Vickers has got this wrong. Of course the recommendation made is all about political compromise - and compromise with George Osborne, the banker' best friend at that, but the reality is that there was and is only one viable way to reduce risk to the economy and taxpayers from banks, and that is to break them up.

Why? Because if they're separate entities with High Street banks barred from investing in and lending to investment banks then there is real separation - and not the make believe, do it yourself, leave it to the bankers' judgement sort Vickers is recommending.

And if we have real separation then there is no chance of the cost to investment banking of this proposal being recouped from retail customers. That just would not happen. But under the deal proposed it will.

So, we'll have small business, individuals and taxpayers still propping up investment banking and its bonuses.

And that just will not do.

In which case this report gets a 'fail'.

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2 Responses

Ivan Horrocks says:

September 12 2011 at 2:56 pm

But it will never happen, Richard, not now, next week or in 2019 as Vicker’s (another ‘hear no evil see no evil’ fool) – unless there’s another banking collapse – for the reasons set out so well here:
http://www.guardian.co.uk/commentisfree/cifamerica/2011/sep/12/lehmanbrothers-financial-crisis
Stevo!! says:

September 12 2011 at 6:55 pm

The banks are already off the mark, claiming that the cost of seperating retail banking from investment banking will mean costs past on to the consumer, and the now familiar whinge that they’ll leave the country and go elsewhere if this is implemented (of course they will).

Of course, as there’s been no date announced when this is supposedly going to happen, its more than likely just hot air. As if Osbourne is really going to implement something that is detrimental to his paymasters.

This will be kicked into the long grass, count on it! It doesn’t go anywhere near far enough as it is anyway!