Thursday, May 13, 2010

U.K's New Coalition Government Plans Breakup of Big Banks And A New Financial Tax

The TBTF (too big to fail) financial institutions are a problem not only for the U.S. The U.K.'s new coalition government has pledged to establish an independent commission to decide whether to break up the banks. This according to an article by the Telegraph today.

The Conservative and Liberal Democrats agreed on banking reform, including included a pledge to

  • introduce an extra tax on the industry
  • robust action to tackle unacceptable bonuses.
The comission has been given a period of one year to report on whether separating retail and investment banking will "reduce systemic risk".

"Both parties have argued for a break-up, but the Tories want to limit the split to the 'casino' activities of proprietary trading while the Lib Dems wish to go further and "separate low-risk deposit taking banking from high-risk investment banking".

In addition, to ensure a regulatory "underlap" that left huge holes in banking supervision does not occur again, a new financial stability committee comprised of FSA and Bank representatives will be created.

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