Two-thirds of FS Players Believe ‘Too Big to Fail’ Banks Should Shrink

Two-thirds of financial services players believe that banks considered ‘too big to fail’ should be forced to shrink, found a Securities & Investment Institute (SII) survey, which followed concerns raised by Bank of England Governor Mervyn King that restraints should be placed on banks to prevent them getting too large.

Sixty-seven per cent of respondents to the survey, carried out on the SII website, felt that it was right for banks to be reined in but 33% voted against such a measure.

Comments from people taking part in favour of cutting banks down to size included that being ‘too big to fail’ led to ‘moral hazard’ among management. “A direct result is management lending without thinking, safe in the knowledge that they won’t be held accountable for their actions,” said the contributor. Another said: “Generally, yes, but only as part of an international course of action. If UK banks on their own are forced to shrink, foreign banks will move in which will raise other problems.”

Among those voting ‘no’ was a respondent who argued: “This may lead to large banks breaking up into a few smaller ones and forming ‘cartels’.”


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