The Confederation of British Industry (CBI) has warned against breaking up UK banks – saying that it
could prevent economic growth.
The government-appointed Independent Commission on Banking is currently looking at Britain’s
financial institutions, and will make recommendations on how best to prevent future financial
instability in the light of the global banking crisis.
Many expect the Commission to formally recommend splitting up the biggest banks, enforcing
separation of their high-street and investment banking divisions to enhance competition and
minimise the potential risk of individual failures. However, the CBI has said that rather than
breaking up the banks, they should instead be strengthened to allow them to support the economic
recovery.
CBI Director General John Cridland said in his submission to the Commission: “Breaking up banks
would be a mistake; we need a strong banking system to help support the economy and growth.
Improving credit flows and providing relevant financial products to businesses will be critical to drive
growth and recovery.”
He went on to point out that financial service companies in the UK account for around 10 per cent of
the country’s total economic output, and that acting in isolation to break up the biggest banks would
jeopardise this position.
The CBI argues that reforms should concentrate on stricter capital requirements and regulatory
control, rather than forcing banks to restructure and split their operations.
Mr Cridland added: “A healthy economy needs a healthy banking system, and the top priority must
be financial stability for all. We must strengthen our banks for the future, without relying on the
taxpayer.”
