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Myners says UK should not follow Obama’s lead on banking

City Minister Lord Myners says the UK should not follow President Obama’s plans to separate retail and investment banking.

Obama yesterday announced “the Volcker rule” which will limit the scope of banks and ensure that no financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund.

The rule will also limit the size of banks, placing broader limits on the excessive growth of the market share of liabilities at the largest financial firms.

Myners told the BBC that Obama’s plans are specific to the US economy and the Government will not separate retail and investment banking.

He says: “He is taking the right policy responses for America and we have taken the right responses in the UK.”

Shadow Chancellor George Osborne has supported Obama’s plan, saying a Tory government would push for a global deal to separate banking functions.

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Mmmm … interesting that the Labour Government knows best … again!! Yeah, whatever … given their track record of messing things up!!

    Have they learned nothing from the repealing of Glass-Steagall in the US?? Why d’ya think they’re trying to ‘recall’ it over the pond??

    Mmmm … and interesting Lord Myners being a former banker … …

  2. Well, hopefully we may have the George Osborne to deal with soon as chancellor. I agree far more with Obama’s response to the total screw-up of the financial world by greedy bankers – but then I am not a Fat-Cat Banker or FSA Employee, am I !

  3. Untlil Myners and his cronies FSA included start getting in the real world then we will all be in trouble The difference between Myners and Obama is that Obama was elected Myners wasnt.

  4. I have heard Myners speak live a couple of times this year and had a chat with him. I found he was pretty sensible and not averse to dissing the government in some areas of policy. So what was he thinking of in his “Today” interview this morning? He must be under severe pressure from GB, who still thinks the answer lies in unconstrained growth and go hang tighter regulation.

    The issue is not one of free market economics; it has become one of social coherence. There can be no problem with banks gambling to make profits, so long as they use their own capital. Indeed, that’s exactly what the merchant/investment banks used to so, being structured as partnerships.

    However, since incorporating, senior managers have nothing to lose by using other people’s money; in fact they are personally rewarded for taking risks (which often one feels they do not understand). If investment is the business they want to be in, that’s fine, but don’t let them loose with retail depositors’ cash. Keep the retail and SME banking services separate from investment banking.

    Then there is the issue of ‘too big to fail’ and moral hazard as governments risk being serially sucked in to bail out these guys when they get out of control. Limit the size of investment banks to a level where they can be allowed to fail. Going down for £50bn is nasty but can be absorbed by the economy; going down for £500bn is ‘too big to fail’ and they will always be bailed out.

    This government talks about recapitalising the banks, but even tripling their equity would only take them back to the ratios they carried 25 years ago.

    Society needs good entrpreneurial businesses of world class, and the financial sector is quite important in the UK. But society also needs to have reliable and secure banks where their money will always be safe, and not exposed to reckless investment into poorly judged mortgages or an impossibly complex and fragile network of derivatives bets.

  5. Lord Myners wrote The Myners Report of March 2001 into institutional investment in the UK. It was a very good report but repeated much of what was already in the public domain with regard to Modern Portfolio Theory. My point is that the report was commissioned by the Chancellor of the Exchequer Gordon Brown. The FSA is the brain child of Gordon Brown who claimed the regulator was world class. The FSA is staffed by bankers and it was the same FSA asleep on thier watch that failed to regulate the banks in the first place. I feel Lord Myners is too closely allied to the problem for him to be able to suggest the solution. Out with the old and in with the new!

  6. I agree with the comments above, we need a UK version of Glass-Steagall. Without it, the same mess could occur in the years to come. How many multi billion bank bail outs can a country support before its debt it sub investment grade?!

  7. Many of the non-US banking problems were caused by banks investing in securities they didn’t understand or by pure-and-simple bad lending.

    Would excluding investment banking activities from their business prevent them from losing money in this way again? I have read nothing so far that tells me it would.

  8. Interestingly enough I have heard Lord Myners appears to ignore more of his advisers from the Treasury, ‘he who thinks knows best knows nothing’. No wonder the public in this Country can’t be bothered to vote. There is no trust or faith in any of our politicians and their called hangers on. Obama is right to be hard on the Bankers. Our politicians have too much say and there most definately is a conflict of interest.

  9. christopher.simon 25th January 2010 at 10:13 pm

    Its simple. Obama has seen the mess the greedy bankers, who are prepared to gamble with hard working peoples money get into, and he is trying to repair the damage that they have caused. Lord M is an ex-banker and like alot of his type still doesnt get IT. Would RBS be in the state it is in if we had gone down Obamas route !!!!!!

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