Sam Bowman's comments on ring-fencing banks feature in the IBTimes
Deputy Director of the Adam Smith Institute Sam Bowman's comments on the financial crisis and the problems with ring-fencing banks featured in the International Business Times:
Sam Bowman, deputy director, of the Adam Smith Institute, told IBTimes UK: "Ring-fencing is a terrible idea. For a start, the financial crisis was caused by investment-only banks [Bear Stearns, Lehman Bros, Merrill Lynch], not banks with both investment and retail arms. So ring-fencing would not have prevented the crisis."
It is possible to argue that banks are more robust the more diverse their operations are. For instance, during the Great Depression, the US's restrictions on interstate banking were very harmful. Banks had all their eggs in one basket and thousands of US banks failed, whereas none of Canada's half-dozen banks, which operated nationally, collapsed.
Since the Conservatives have won the election and regulation is not required as political expediency per se, the City has been hoping for an end to "banker bashing". The situation with HSBC only makes this more acute.
Bowman added: "The HSBC cuts are a sign that we can't take the financial sector for granted; yes, we have friendlier regulations than most, and it's unlikely that the whole City will up sticks and leave, but at the margin the government can have an important impact on investment and jobs in the UK.
"I do hope we stop getting so much banker bashing, mostly because that adds uncertainty to the financial system. Even if Osborne does not intend on imposing more punitive regulations and/or taxes on bankers, there is rhetoric that suggests he might confuse markets and make financial firms less likely to invest in the UK," he said.