BRITISH DEPUTY prime minister Nick Clegg says he favours a break-up of Britain’s biggest banks to stop casino behaviour that threatens a collapse of the industry and further state bailouts.
The Liberal Democrat leader, speaking on the BBC's Andrew Marr Showyesterday, said: "I think the banking system needs to be made safe. It can never again become such an oversized liability for the British economy. That's why I think there is a strong case to look at the way in which you can hive off . . . high-risk, overleveraged banking activities from low-risk, high street retail banking."
However, John Vickers, head of a commission tasked with reform of banking, appears not to support the Lib Dems’ preference for a division of the retail arms of banks – covering savings, current accounts and mortgages from more profitable investment operations.
Instead, Mr Vickers indicated that the two arms could remain under single ownership, but only if the more riskier elements were ring-fenced and protected by a bank holding much higher capital ratios.
“One response to this concern could be somehow to ring-fence the retail banking activities of systemically important institutions and require them to be capitalised on a standalone basis,” Mr Vickers said. He has not accepted arguments advanced by HSBC, RBS, Barclays and other major banks that they can operate more efficiently when all sectors work in unison within the bank.
The Vickers report will not be completed until the autumn. The coalition is faced with difficult times in the weeks ahead when the banks offer multibillion pound bonuses to senior staff despite strenuous efforts to persuade them to restrain the size of these.
