Sir Martin Taylor, former boss of Barclays, has told the Future of Banking Commission that savings must be protected and that the banks are incapable of instigating the reforms needed to protect against a future crisis.
Sir Martin told the Future of Banking Commission that the narrow banking idea, that consumers’ savings should be protected in the event of a bank going bust because it has taken too many risks, may be the best approach.
He said: ‘We need some ring-fencing of the retail deposits. I think universal banking is dangerous. […] There is a huge problem of scale. With international universal banks, nobody has an overview of all the accounting. No one person can really know what’s going on.’
‘Rearguard action’ by banks
The Commission was told that there is a ‘rearguard action’ going on, with the banks being worried that they will ‘not have a say in their own future’.
The narrow banking concept, advocated by Bank of England governor Mervyn King at a previous Commission hearing, was rejected earlier in the day by Royal Bank of England chief executive Steven Hester, who said: ‘Many more narrow banks have gone bust than wider banks. There is no factual evidence supporting the idea that the combination of retail and investment banking is more risky.’
When questioned about what could be done to avoid a future financial crisis, Sir Martin acknowledged that structural reform of the banking sector was required, but warned that there would be considerable opposition from the City. Sir Martin said: ‘Bankers themselves are incapable of reforming the industry. Banks will strenuously object.’
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