Brown refuses to split the banks
Gordon Brown distanced himself from Mervyn King’s suggestion that Britain’s biggest banks may have to be split up in a lively prime minister’s questions today.
Liberal Democrat leader Nick Clegg outlined the Bank of England governor’s comments last night to Scottish business leaders, when he said “separation of activities” might have to be considered.
“Is the Bank of England wrong?” Mr Clegg asked. The prime minister responded by stressing the role of regulation, not separation, in preventing another financial crisis.
Sketch: Bipeds at the dispatch box
“He’s got to remember that Northern Rock was effectively a retail bank and it collapsed,” he said, before making a similar comparison with Lehman Brothers, which dealt almost entirely in investment.
“The difference between having a retail and investment bank is not the cause of the problem,” the prime minister argued.
Mr Brown’s opposition to splitting the banks puts clear water between him and the Tories on the issue. Shadow chancellor George Osborne had earlier called Mr King’s speech “powerful and persuasive”.
The prime minister’s clear stance in PMQs appeared to clash with briefings given by his spokesman shortly beforehand.
“The most important thing is we must reduce in every way the risk the banks present to the banking system,” the spokesman said. “There is a general agreement now that reform is the way forward.”
The prime minister’s comments followed an exchange between Mr Brown and Conservative leader David Cameron on Royal Mail, which faces strike action from postal workers beginning from tomorrow.
