Mervyn King Calls for Splitting UK Banks

October 21, 2009 Share Print 0

The statements from the Governor of the Bank of England, have stirred up debate as they were refuted by the Prime Minister Brown.

King said the use of taxpayers’ money to prop up banks had created “possibly the biggest moral hazard in history” since institutions had an incentive to take risks if they were confident they would be bailed out.

“It is hard to see how the existence of institutions that are ‘too important to fail’ is consistent with their being in the private sector,” King said. “Encouraging banks to take risks that result in large dividend and remuneration payouts when things go well, and losses for taxpayers when they don’t, distorts the allocation of resources.”

CNBC

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.