Mervyn King calls for bank split
Updated on 21 October 2009
The governor of the Bank of England surprises the City by calling for the UK's biggest banks to be split, amid growing public anger over bonuses.
Speaking in Edinburgh, Mervyn King called for the split to separate the high-finance investment arms from the retail banks which provide current accounts to ordinary people.
The remarks came amid growing public anger about bank bonuses, with a report predicting a 50 per cent increase in bank bonuses this year.
The prime minister today ruled out a break-up of the banks in a bid to prevent future catastrophic financial collapses. Gordon Brown insisted that improved international regulation was the best way to ensure the stability of the system.
However, challenged by Liberal Democrat leader Nick Clegg at Prime Minister's Questions, Mr Brown insisted that such a split would not have averted the financial crisis.
"He has got to remember that Northern Rock was effectively a retail bank and it collapsed. Lehman Brothers was effectively an investment bank without a retail bank and it collapsed," he said.
"So the difference between having a retail and an investment bank is not the cause of the problem. The cause of the problem is that banks have been insufficiently regulated at a global level and we have got to set the standards for that for the future."
