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British banks today fought back after a rift emerged between the Governor of the Bank of England and the Chancellor over their future regulation at last night's Mansion House dinner.
Governor Mervyn King said banks deemed "too big too fail" sat uneasily in a market economy. He also said there should not be state guarantees behind banks which combined retail and investment banking.
"It is not sensible to allow large banks to combine High Street retail banking with risky investment banking or funding strategies, and then provide an implicit state guarantee against failure," said King.
He suggested savers' guarantees should only be made available to High Street banks which offered "narrow" basic retail services.
His proposals go much further than either Alistair Darling's or those of Lord Turner, the chairman of the Financial Services Authority.
But bankers fear new regulations will go too far, cost too much and impede their ability to lend capital to businesses and individuals.
"The vast majority, of Britain's big banks are riding this crisis very well," said Angela Knight chief executive of the British Bankers' Association.
"We disagree completely that riskier investment banking business should be split off from retail banking," she added.
Reader views (9)
Are the banks running scared???
- C Cusano, Bedford
Given the choice of believing either Darling or King, it is a no-brainer that King is the winner, by a mile. He warned about taking regulation away from the Bank, and he is dead right this time too. The Banks are hardly in any position to comment, having landed this country and its people in the biggest financial crisis since the Depression. Mervyn's the man!
- Alex, Scotland
Of course the Bank of England should be given back the supervisery powers of the Banking sector.It had done this in a good and descrete manner prior to Gordon Browns stripping of those very powers and handing them to the FSA and Treasury.
The BoE was left with as much power and control as NHS Direct has versis a real live Doctor. The FSA knew as much about banking supervision as a telephone operator knows about strokes, heart attacks,cancers etc.
On paper it might look like a lot but in fact they didn't have a clue as to what was actually required.
- David S., LONDON
Angela Knight is not just the chief executive of the British Bankers Association - she is the Bob Crow of Banking!
- William, London
'We disagree completely that riskier investment banking business should be split off from retail banking'
Well the banks would say that wouldn't they, best chance they've got of doing the same thing again, execs trousering more serious cash, while the British tax payer picks up the tab again when it all goes pear shaped. The banks seem to forget how many billions of tax payer money has been spent to save them. Unbelievable arrogance.
- Stuart, London
Bring in laws with real bite and real punishment, on all financial services; none of the