Complete Finance Blog

Despite the fact that the UK government and the Bank of England appear in favour of spitting UK banks into smaller more competitive components, Lord Adair Turner, the chairman of the Financial Services Authority (FSA), has today issued his opinion on the subject. He believes that by detaching the more stable elements of the UK banking sector from the “Casino institutions” we could well be injecting further instability into the sector in the medium to longer term.

There is no doubt that some of the more risky UK banking operations have in the past benefited from a firm base created by standard and traditional banking operations. It would appear obvious that if these more risky operations are standing alone there would be greater fluctuations in financial strength and financial liabilities which could attract more risky investments and more risky strategies. The key to this situation is the regulatory environment for a new and “improved” UK banking system in the future because ultimately all of the good work over the last two years could be undone in an instant if banks still retain power over their own destiny.

There is a lot of information for the UK government and the regulators to take in and ultimately the next phase in the reorganisation the UK banking system could be the most important yet.

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