PM rejects call for banks to be split
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Prime Minister Gordon Brown has hit back at Bank of England governor Mervyn King’s call for banks to split their retail and investment activities.
King would like to separate the riskier activities of banks from their core functions and says they should not be allowed to become too important to fail.
But Brown says the difference between retail and investment banks is not at the heart of the sector’s problems.
He says: “King should remember that Northern Rock was effectively a retail bank and it collapsed. And Lehman Brothers was effectively an investment bank and it too collapsed.”
He says the root of the problem is that banks have been insufficiently regulated at a global level.
Meanwhile, chancellor Alistair Darling has warned that although the world has avoided sliding into a prolonged depression the UK economy is not out of the woods yet.
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