A Conservative government would look at whether Britain needs smaller banks, shadow chancellor George Osborne has said in a speech. Mr Osborne said the eventual sell-off of part-nationalised banks should not necessarily be to the highest bidder but those benefiting the economy most. Creating larger institutions could encourage more risk because they were "too big to fail", he added. It would be a "bitter irony" if the sector became "even riskier", he said.
He's quite right. Both here and in the US regulators should be breaking up financial institutions into small enough units that the failure of one has a minimal domino effect. But doubtless the reason nothing will be done (and I'd be so pleased to be proved wrong) is that the banks will 'need to be large enough to compete internationally' or similar. In which case we'll be back where we were, only more so, as we now have the Lloyds / HBOS behemoth. As I said :
"if the banks were 'too big to fail', shouldn't we be thinking, both here and in the States, of breaking them up into units which could be allowed to fail - with appropriate protections for depositors ? Instead we're creating even bigger banks."I would love to be persuaded that the Tories have the root of the matter in them, as Churchill would put it. But I fear that my General Election vote will be a case of the least worst option.