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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, 18/06/2009 16:54
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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, 18/06/2009 15:41
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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, 18/06/2009 15:08
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Angela Knight is not just the chief executive of the British Bankers Association - she is the Bob Crow of Banking!
- William, London, 18/06/2009 15:01
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'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, 18/06/2009 14:23
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Bring in laws with real bite and real punishment, on all financial services; none of them are trust-worthy.
But the State will not; bet your next 20 years of taxes on that.
- Mickyinlondon, london, 18/06/2009 13:55
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I listened with disbelief as Angela Knight peddled an unbelievable line that all our banks were fine, no need for any regulation as actually they came through okay. Does she actually believe the rubbish she is spouting?
It appears bankers still do get it and clearly the 2 Ronnies running our Government and Treasury have signed up as well. (must be planing for a nice job in the Banking Industry.
- David, London, 18/06/2009 13:20
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How exactly can Angela Knight back her quote with actual numbers? Barclays and HSBC doing ok, Lloyds (by virtue of owning HBOS), HBOS, RBS and NatWest (by virtue of being owned by RBS) have struggled.
- Steve, Essex, 18/06/2009 11:46
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If they had been able to control themselves in the past they would not have cause to be arguing about it now.
What about the private shareholders that have been almost wiped out by there cavaleir attitude.
More power to the bank of England YES and quickly
- Ray, Suurey UK, 18/06/2009 09:45
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