Banking reform proposals miss the point
4 February 2013
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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:
To arrange an interview with an IEA spokesperson, please contact Stephanie Lis, Director of Communications: 020 7799 8909, slis@iea.org.uk
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.
The IEA is a registered educational charity and independent of all political parties.
“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:
To arrange an interview with an IEA spokesperson, please contact Stephanie Lis, Director of Communications: 020 7799 8909, slis@iea.org.uk
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.
The IEA is a registered educational charity and independent of all political parties.
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