Peter Hoskin

A banking split

A banking split
Text settings

Blame Bob Diamond. Until the "unacceptable face of banking" (© the utterly acceptable face of politics, Peter Mandelson) was appointed chief executive of Barclays, the issue of banking reform was trundling along noiselessly in the background. But now it has spilled, violently, back out into the open. Critics of Diamond say that his very presence makes the case for splitting the retail and investmet divisions of banks – you can't, they say, have someone who made their money via "casino banking" presiding over a high street banking chain. But the banks are warning that any such split would force them, and their tax dollars, abroad.  

The government's official position is stasis. The coalition agreement made provisions for "an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way." But, unsurprisingly, there appears to be a difference of opinion behind this. Vince Cable has consistently pushed for a complete Glass-Steagall style separation of investment and retail banking, and recently said that this "is the clear direction in which we are going". While George Osborne has never been as explicit, and is thought to be far less convinced by the idea.

Curious thing is, the Tories may have sketched out a happy compromise even before they entered into coalition. In a series of speeches and an important White Paper, Osborne didn't advocate splitting the banks, but he did suggest a series of measures which would impose greater requirements on high risk activities. As I said at the time, it was a kind of de facto, rather than de jure, Glass-Steagall. And it's the kind of thinking whose time may have come.