Banking reform proposals miss the point

Reforms should make bank failure safe without relying on the taxpayer

Commenting on the Chancellor’s banking speech, Mark Littlewood, Director General at the Institute of Economic Affairs, said:

"George Osborne's proposals are the wrong solution to a misidentified problem. He is in grave danger of perpetuating the myth that retail banking is intrinsically safe and investment banking is intrinsically reckless and dangerous. In reality, Northern Rock went bust despite being a retail bank with no investment arm. It is not at all clear how ring fencing would have prevented that.

"The Chancellor seems hell-bent on making banks safe. Instead, we need to make bank failure safe. We therefore need more focus on how to wind up failed banks without recourse to a single penny of taxpayers' money.

"Sadly, George Osborne seems to want to introduce still more prescriptive regulations which will make genuine competition harder and could actually exacerbate the "too big to fail" problem which he claims he wishes to solve."

Notes to editors:

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