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Britain plans to make banks split off investment business…

UK Daily Mail link (British govt’s Osbourne called this the “Most radical reform of banking in decades…”, yet the NYTimes didn’t think the ‘news was fit to print’ until a day later, and then page 2 of the business section below the fold) LOL

When Gramm-Leech-Bliley (repealing G-S) was being proposed, one of the biggest arguments for it was that “everyone else allows banks to gamble with deposits”. Well, that excuse is now gone. World’s 1st/2nd largest financial center is shutting the gate.


Ministers will today give the go-ahead to the most radical reform of banking in decades….

Business Secretary Vince Cable yesterday confirmed that the Government will accept ‘in full’ plans to split banks’ high street and investment divisions.

(I can’t get the NYTimes online version yet, only print. The NYTimes print story, of 12/20/11 AM, says 1) rules are bigger than Dodd-Frank, 2) investment banking and retail banking would be completely separate legal entities, 3) and so therefore investment banking units would be allowed to fail without affecting rest of bank, 4) this won’t be fully roll until several years pass.

This is all I ask. If banks want to gamble their brains out, more power to them. If they want to pay their execs a lot of money, that’s their business. But don’t ask me (the FDIC) to cover your losses. I think a lot of the excesses of the credit and derivative bubbles would deflate, if the counterparty’s strength was all the gamblers had to rely on. Way to go, UK.)

The Independent Commission on Banking report, which was published in September, recommended that a bank’s retail business should be ring-fenced from its investment business and that banks should be forced to hold more capital to help protect them against future crises.

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