Bank of England's Haldane
Calls for Glass-Steagall Again
Oct. 27, 2012 (EIRNS)—Andrew Haldane, the Bank of England's executive director for financial stability has once again publicly called for the full separation of commercial and investment banks, and declared that the so-called "ring fencing" idea of the Vickers Commission is a failure. Speaking before the Institute of Directors, Haldane put forward a number of proposals, including strict caps on the size of banks, a 20% reserve requirement for banks engaging in speculation, but then declared that
"The history of big bank failure is a history of the state blinking before private creditors. One way of lessening that dilemma, and at the same time making resolution more credible, is to act on the scale and structure of banking directly."
He specifically proposed "full separation of investment and commercial banking."
Haldane noted that the already existing too-big-to-fail City banks "are even bigger" than before the crisis. Barclay's balance sheet is £1.7 trillion, Royal Bank of Scotland is £1.37 trillion, and Lloyds Banking Group is £930 billion (all three banks were bailed out by the British government through partial nationalization during the last phase of the banking disintegration). Haldane noted that if the implicit guarantee of state bailout and the taxpayers subsidies to the too-big-to-fail banks were to be removed, they could not survive
"Like King Kong and Godzilla, these giants would arguably then be physiological impossibilities ... the weight transfer associated with a single step would have shattered their thigh bones."
Haldane directly criticized the idea of "ring fencing," warning that
"Claims that they have solved the too-big-to-fail problem appear to me, however, premature, probably over-optimistic. Worse, they risk sending a false sense of crisis comfort."