Break up the banks

Tweet In calling for the break-up of some of the banks, the Governor of the Bank of England is talking a great deal of sense. It seems unlikely, however, that either a Labour or a Tory Government will take much notice of his call.

Following the Tory 'Big Bang' of deregulation, the distinction between the risky segment of merchant banking and the less risky section of high street banking became blurred. The two were allowed to merge - something which had previously been banned - and the result was that the risky element succeeded in gambling away the stability of the high street element.

We as taxpayers have had to bail them out. But it was mostly the collapse of the high street banks that we really had to avert; if the two hadn't been allowed to merge, the government would have found it a great deal easier to stand back and watch the gamblers take their richly deserved hit. And if they hadn't had the resources of our day to day banks to play with, perhaps the level of the damage they did would have been lower anyway.

Splitting the two segments back out makes eminent sense – and is by far the best way to ensure that the speculators do not destroy the financial services sector again, as they seem not only likely to do, but positively keen to do, if left to their own devices.