Meacher blast for banking system

BRITAIN has the most profoundly dysfunctional banking system of any G7 country and must be overhauled.

That’s the view of Oldham West and Royton MP Michael Meacher criticised the UK’s banking model, which links “speculative investment with retail deposit–taking,” citing this as a major cause of the economic crisis.

Opening a backbench–led debate on banking reform, Mr Meacher told ministers: “At present Britain has the most profoundly dysfunctional banking system of any G7 country.

“I believe we need to break up the mega banks with their addiction to mortgage lending.

“We need smaller banks, we need in particular specialist business banks, infrastructure banks, housing banks, green banks, creative industries banks, and all the others.

“Only this kind of fundamental reform of the banking system can provide the foundations for the economic and social transformation of this country which we all want.”

He said the financial crisis was caused by various factors including an “overlax” monetary policy, the development of credit derivatives, a banking structure which allowed banks to be “too big to fail”, and the role of “enormous bonuses which drove the recklessness”.

Mr Meacher called for a separation of investment banks from retail banks, warning that the taxpayer guarantee on retail deposits currently provided “collateral” for financial trading.

Former Bank of England economist Sir John Vickers is chairing a commission investigating whether Britain’s biggest banks should split their retail and investment divisions.

Tory Douglas Carswell (Clacton) disagreed with Mr Meacher’s call to break up the banks.

He said: “I think instead of a crude institutional separation of the banking system, we need an alternative that allows legal separation within existing banking structures — a new legal status for deposits so that if you are a depositor and you open an account, you can choose to ensure that legally your deposits are your property and the bank cannot endlessly lend against them.”