Commenting ahead of Chancellor of the Exchequer George Osborne’s announcements on ring-fencing retail banking, Mark Littlewood, Director General of the Institute of Economic Affairs, said:
“The Chancellor’s plans miss the point. What we need are adequate legal mechanisms for the effective winding up of banks. Only through such mechanisms can we allow banks to fail without bringing down the whole banking system with them.
“The government should not legislate to ring-fence retail banks. If such action is needed in the case of specific banks, the Bank of England, as regulator, should make that call.
“It is also appalling that the government is looking at making their announcement while the Independent Commission on Banking is still producing their report.
“Northern Rock was a retail bank without an investment arm, and Lehman Brothers was an investment bank without a retail arm – Osborne’s plans would not have made any difference to the way in which the failure of either of them played out. These plans are not the solution and, if they have any effect at all, it will simply be to see the costs for retail bank customers to rise.”
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Notes to editors
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
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