King warns banks should be broken up

Bank of England Governor Mervyn King has thrown his weight behind breaking up the banks as part of reforms to protect the taxpayer from another financial meltdown.

In a speech to the Buttonwood Gathering in New York, he warned creditors "they will bear losses in the event of failure" and stressed banks in the future must be "financed much more heavily by equity rather than short-term debt", the Telegraph reports. On separating investment banking from retail banking, he said: "If there is a need for genuinely safe deposits the only way they can be provided, while ensuring costs and benefits are fully aligned, is to insist such deposits do not coexist with risky assets." Read more...