This policy wouldn’t have saved Northern Rock or Lehman Bros

Ruth Porter writes for City AM

The chancellor’s support for ringfencing the retail sections of banks from their investment arms might have made headlines – but it won’t solve any future banking crises.

Ringfencing wouldn’t have prevented the financial crash, the resulting recession or the bailout of banks by the taxpayer.

Northern Rock and Lehman Brothers were both relatively simple banks, one focused on retail, the other on investment; both would still have failed in exactly the same way under the measures the chancellor has proposed.

It is possible – in certain cases – that the Bank of England as financial regulator might feel in the case of a particular bank that ringfencing could be helpful in making its activities more transparent. But this measure should not be a matter for government legislation and certainly not a blanket approach applied to the whole sector.

Read the rest of the article on the City AM website.

Invest in the IEA. We are the catalyst for changing consensus and influencing public debate.

Donate now

Thank you for
your support

Subscribe to
publications

Subscribe