U.K. mulls breaking up big banks

TEXT OF INTERVIEW

STEVE CHIOTAKIS: A government probe in Britain is looking at
whether some of the country’s biggest banks should be broken up. The Independent Banking Commission laid out some of its options in a report today. Marketplace’s Stephen Beard is with us live from London with what it all means. Hi Stephen.

STEPHEN BEARD: Hello Steve.

CHIOTAKIS: Breaking up big banks — that seems like a radical idea. Is this really on the table there?

BEARD: Oh it’s certainly on the table. As in the U.S., there’s been a lot of concern here about these big, universal banks, which have both risky investment banking activities and retail banking. If the risky business goes bad, that threatens millions of retail depositors and so the bank has to be bailed out. But whether breaking up these big, universal banks is likely to happen here in the U.K. is another question.

Analyst Michael Prest thinks not since the U.S. has already passed up on the chance to carry out the same reform.

MICHAEL PREST: The great bank break up, which some people thought might happen, never occurred in the U.S. and therefore it’s unlikely, I think, to happen in the U.K. because there would be enormous resistance in the city of London to running their banks in a completely different and potentially less profitable way from their competitors.

CHIOTAKIS: All right, Stephen, so if breaking up the big banks in the U.K. is not practicable, what other reforms are we talking about?

BEARD: A possible halfway house in which there’s a firewall between the investment banking and the retail banking, so the retail arm is insulated. An absolutely key aim of this commission is to ensure if things go wrong in a big way again, it’s the banks, shareholders and creditors that pick up the entire tab, not the taxpayers.

RADKE: Marketplace’s Stephen Beard reporting from London. Stephen, thanks

BEARD: OK Steve.