Page last updated at 21:39 GMT, Tuesday, 28 July 2009 22:39 UK

Break up the big banks says Cable

Vince Cable
Vince Cable said it could take 10 years to turn the banks around

Lib Dem Treasury spokesman Vince Cable has said large banks such as Lloyds and RBS should be broken up as they pose too great a risk to the taxpayer.

Speaking on BBC Newsnight Scotland, Mr Cable said it was unhealthy to have banks of that scale.

He said they should be split up before they are returned to private ownership.

The government has invested about £75bn in Royal Bank of Scotland and Lloyds since they needed emergency funding last year due to the credit crunch.

The UK taxpayer is now the major shareholder in Lloyds Banking Group, which owns Halifax and Bank of Scotland, and RBS, which owns NatWest.

It means the British taxpayer is underwriting very dangerous high-risk activities
Vince Cable
Lib Dems

Mr Cable said UK Financial Investments (UKFI), which was set up to manage taxpayers' shareholding in the banks, should make it clear that their principal duty was to provide capital to the British economy and to British companies.

He said government seemed to pushing the banks towards returning to private ownership too quickly.

It may take 10 years in public ownership before the banks can be properly turned around, he said.

Mr Cable added that it was "not healthy" to have banks of the scale of RBS and Lloyds.

He criticised the combination of ordinary banking, such as business lending and mortgage payments, and so-called casino banking.

"These two things should not co-exist in the same institution," he said.

"It is highly unstable. It means the British taxpayer is underwriting very dangerous high-risk activities, so for that reason alone they should be split up.

"In addition the European Commission has made the case that there is now far too little competition."

He said increasingly concentrated ownership did not give the consumer a good deal.

"It is dangerous in giving excessive market power and before these banks are returned to private ownership they should be split up," the Lib Dem MP said.

"This may mean reopening, for example, the whole issue of the Lloyds/Royal Bank of Scotland merger and possibly reversing it."

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