FSA sounds warning on 'risky' bank break-ups

FSA sounds warning on 'risky' bank break-ups



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Speaking at the FSA’s Turner Review Conference yesterday, the chairman of the FSA, Adair Turner said there is no “silver bullet” to address the problem of banks being “too-big-to-fail”. He emphasised that the answer lies in a combination of different policies between which trade-offs can be made.

Addressing “narrow bank” proposals which seek to separate utility banking from casino banking, Lord Turner argued that an extreme narrow banking model, with retail banks investing only in government securities, was certainly practical but failed to address the crucial issue of booms and busts in credit supply and as a result, could actually increase financial instability. 

Lord Turner’s comments followed announcements by Chancellor Alistair Darling that Northern Rock, Royal Bank of

Scotland

and Lloyds Banking Group would be broken up in order to create three new banking entities, which would be on the high street within the next five years.

Today the Treasury and European Commission are expected to compile a list of assets that the banks will be made to sell off as part of its participation in the Government’s Asset Protection Scheme (APS).

It is thought that Royal Bank of

Scotland

alone could be forced to sell off 312 branches in

England

, as well as NatWest branches in

Scotland

, which would be rebranded as Williams and Glyn. Other assets that could be sold include its insurance arm and US retail arm, Citizen Bank.

This morning the bank said that it would be cutting 3,700 jobs across its retail branch network.

 

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