Treasury select committee member Andrea Leadsom is calling on the Independent Commission on Banking to be more radical and consider breaking up the big banks into smaller organisations to increase competition.
The commission’s interim report, published in April, proposed ringfencing retail banking activities rather than a complete split between investment and retail banking.
Conservative MP for South Northamptonshire Leadsom says the increasing dominance from big banks in the provision of services has reached unhealthy levels.
She says: “We desperately need competition. The ICB is not being radical enough. Rather than looking at splitting banks along retail and investment lines it should look at breaking them up into smaller operations.”
Currently, smaller banks pay to use clearing systems owned by bigger banks. Leadsom says this system should be replaced with a central plug and play clearing system, owned and licensed to banks by the Bank of England.
She says: “It would cost hundreds of millions of pounds to build but it would also be a perfect ringfence. When a bank gets into trouble, the bank could simply cut them off from access to their current accounts and hand them to another bank.”