HSBC warns Government over banking break-up

Sep 4 2010 by Iain Laing, The Journal

HSBC chief executive Michael Geoghegan moved to Hong Kong earlier this year to be in the bank’s key region. And the chief executive of Asia-focused rival Standard Chartered warned last month that it had increasingly fewer reasons to keep its headquarters in London as UK banks faced ever more regulations and higher taxes.

The coalition Government launched the independent banking commission in June to consider possible reforms of the banking system.

The commission is likely to consider other structural reforms, such as breaking up high-street banks to increase competition, or forcing the banks to simplify their international structures to make any future bankruptcies easier.

The Liberal Democrats campaigned during the election in favour of splitting up the banks, separating their traditional commercial banking activities from their riskier investment banking business.

Many economists thought after the 2008 collapse of Lehman Brothers that the large international banks had become “too big to fail” and that if banks know they will cause substantial damage to the country’s financial system then they will be bailed out by the Government if they run into trouble.

As a result the bigger banks are thought likely to take too many risks.