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Tories plan to break up banks that are ‘too big to fail and too big to bail’

The Conservatives would consider breaking up big state-owned banks such as Royal Bank of Scotland and Lloyds if they win the next election.

Tory Shadow Chancellor George Osborne says it may be unsustainable and risky to keep big banks going and has suggested breaking them up into smaller institutions when the time comes to sell them off.

Speaking at the Royal Society of Arts last week, Osborne said: “We need to think deeply about whether we can sustain banks that are not only too big to fail, but potentially too big to bail.

“Not only do large financial institutions do more damage when they get into trouble, but their very size and ‘too big to fail’ status may encourage them to behave irresponsibly and take risks that smaller banks dare not take.”

John Charcol senior technical manager Ray Boulger says: “Big is not necessarily bad. Look at HSBC, it is one of the biggest banks in the world and has made fewer mistakes than other banks. While there is an argument for having a smaller bank that is purely domestic, it would not be appropriate to get all banks to operate like that.

“The real answer is probably better regulation, not more or heavier or lighter-touch regulation, but better. Simply saying we should do away with big banks is not the answer because we need them for certain things.”

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