'Should we split the banks up?' poll discussion

Former_MSE_Lee

Poll started 18 January 2011:

Should we split up the banks?

Too big to fail, that's the cry. The independent commission on banking is debating whether we should split banks into their retail (the old fashioned credit cards, mortgages, savings etc) and investment arms (the gambling bit, trading, derivatives markets, international finance).

Which of these stark choices is closest to your view on whether we should split up the banks?

Split the banks up
Keep it as is.


Please vote here or click 'post reply' to discuss below. Thanks




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sparrer

'So the split would leave the bits we use less likely to fail.'

Please insert comma....either

a.the bits we use, less likely to fail

or

b. the bits we use less, likely to fail

Ta

witterquik

Wow, I thought there would already be opinions flying around if it's anything to do with Banks...

I voted to keep them together. Splitting them up (if it worked) would only solve a tiny part of the problem, and it would only cause more issues anyway. We take a lot of things for granted in the UK, the main ones being free bank accounts for everything (electronic payments, cheque processing). Banks merge their arms in order to take advantage of economies of scale, from using the same Treasury department to move their money to using the same Payroll department, offices and cleaners. All of this means that the investment arms subsidise your free personal bank accounts. If you separate those you'll lose the economies of scale but you will also have massive costs of restructuring.

One thing people haven't thought of is about the companies which went against the trend-I work for an investment bank that was making losses solely through its retail and card services arms-the Investment Bank was the one area which remained profitable and enabled the retail business to give homeowners more time to organise repayments instead of repossessing left right and centre before they collapsed.

So it's not always the case that the Investment Banks are the dead weight, in good or bad times.

mrjoet

I believe they should split them up. In the current situation you have a bank that takes people's deposits and then uses the cash for investments. I have no problem with this when the investments are smart and work but as we have seen this can backfire tremendously. When savings are guaranteed by the government then the banks have no incentive to act responsibly, even without the guarantee, the banks must know the government would never allow the retail side to collapse as business loans, mortgages, transactions and people's livelihoods would disappear which bring the economy to its knees. What is needed is a system that provides a service for the economy (retail, business banking) that can't be brought down by investment banking. If the banks had been separated in the first place the effects would have been much less, the housing bubble would have still burst but the investment banks would have gone under and the retail banking sector would have faced challenges but not have required outrageous bailouts.

udydudy

mrjoet wrote: »

I believe they should split them up. In the current situation you have a bank that takes people's deposits and then uses the cash for investments. I have no problem with this when the investments are smart and work but as we have seen this can backfire tremendously. ............... If the banks had been separated in the first place the effects would have been much less, the housing bubble would have still burst but the investment banks would have gone under and the retail banking sector would have faced challenges but not have required outrageous bailouts.

I think there is a misconception that the investment banks caused the fallout which led to recession. The easy money available was the retail banks which threw caution to the wind in their desire to become big, increase customer base and drive profits.

It is this easy money/credit availbaility that led to huge credit card liability, mortgages with 125% LTV, etc. All this was being managed by the reatil banks not the investment banks. The investment banks were actually playing with the toxic derivates created out of packaging the mortgage. The reason the packages were toxic was simply because the retail banks were simply not bothered to ensure proper valuation and compliance which would have ensured for example whether self certification application was actually a misrepresentation of income or not.

Ofcourse the investment banks dd play their part but the star of the pack were the retail banks along with the regulatory authorities and also the government(the one who was in power then) as all these people/institutions were enjoying playing their part in the all boom no bust Party!!!

Ofcourse we consumers are also partly responsible as we joined the party!!. I guess we the ocnsumers have got used to saying oh I got drunk but I am not to blame it is the alchohol producer or the host of the party who supplied the drinks are to blame. Its never accepted that we should have not drunk that much or as in this case borrowed that much!!..

In Short Keep them together, but keep them well regulated in good or bad times!!

yorkiehp

The banks bailed out by the labour government should be split but those banks that did not fail should be left as they are. They are successful independent businesses and should be treated accordingly. It is these banks that we need to keep in this country.

witterquik

I wouldn't say interest charges is why society is crumbling, despite the long string of quotes.

For quite a vast majority of people with unsecured loans the issue is the same as the government-people living beyond their means. We live in society which throws away instead of mends, which hires someone instead of doing yourself and where everyone has to have the best of everything (lcd tvs, iphones etc), regardless of income. Yes, banks provide loans to people who want these things without an income to support these purchases but a little bit of self-restraint is required.

This move is a clumsy, blunt instrument to try and avoid what was inevitable-unless society changes then this kind of boom and bust will come around time and time again.

XRAT

Split them in two, call one side building societies, and the other banks!

Or did we try that already..., and find it works?

spendalot_sanj

teddyco wrote: »

The Old Testament
From the King James Version

[Exodus 22:25] If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.

[Leviticus 25:36] Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee.

[Leviticus 25:37] Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase.

[Deuteronomy 23:19] Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury:

Hi Teddyco, hmm, not sure about this. Quoting the Bible, are you advocating that moneylending (usary or commonly known as charging interest on loans http://dictionary.reference.com/browse/usury) should not obtain interest?

I am by no means a expert on religious texts, but it appears from your quotes that The Old Testament really did not like interest paid in money or kind, should I presume the New Testament to be the same?

If a charge is not levied for lending money, or if the charge levied is not based on the amount lent, the duration of the loan and the risk of the loan. Then what to replace this?

There must be a formulated religious/theological position on what is the replacement system. Can you enlighten us? I simply do not know, and am intreged.

Thinking this through, I think there are specific Islamic Banks and I think these institutions do not charge interest, but charge rent (I think), is this right, is this the model you feel is the solution?

Thanks

khuyenmai

I had never read this topic , before .I have been studying banks. So this topic is very useful to me. Thank threads of you. I will note this topic ...
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