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Tackle harmful big banks, Welby urges

01 March 2013


Emergency question: George Osborne faces the House of Commons on Monday, after it was announced that the ratings agency Moody's had cut the UK's AAA credit rating

Emergency question: George Osborne faces the House of Commons on Monday, after it was announced that the ratings agency Moody's had cut the UK's AAA...

THE Archbishop of Canterbury asked the Chancellor, George Osborne, on Monday, why he lacked the "will" to break up the "colossal" banks that risked harming the economy.

Mr Osborne gave evidence on Monday afternoon to the Parliamentary Commission on Banking Standards, which Archbishop Welby was appointed to last year, when he was Bishop of Durham ( News, 20 July 2012, 18 January).

Archbishop Welby told Mr Osborne that the Commission had discovered during previous evidence sessions "that you can have big, simple banks, or small, complex ones, and you can usually manage them if you're competent. Big, complex banks are not only too big to fail: they're too big to manage."

Archbishop Welby went on to say that the Chancellor was "continuing to defend the idea of a small group of absolutely colossal banks. . . Is this lack of will to break them up and reduce them to a size that eliminated risk to the economy not simply a recipe for a repetition of the disasters we've seen in the last few years?"

Mr Osborne responded: "I completely accept that running a large, complex bank is a difficult task, and can fail. And that is why we're ring-fencing the retail banks [from the investment banks], so we can protect the thing that is essential for the functioning of the economy.

"But I don't think it would be possible to create in Britain a world where we just had a lot of very small banks. We live in a heavily interconnected global economy; some of the big players in our country are not British banks. Unless we were to close our doors to all of them . . . I don't think that's that realistic."

Archbishop Welby asked Mr Osborne to explain how he intended to control "global banks", which were "significantly more risky to the British economy". Mr Osborne said that he hoped that regulators such as the Prudential Regulation Authority, which will supervise banks from April, would "ask questions of judgement rather than just questions of form-filling".

On Tuesday, Archbishop Welby was introduced into the House of Lords for the second time, and appointed again to the Parliamentary Commission on Banking Standards. He was introduced into the Lords for the first time after being consecrated Bishop of Durham. The Lords Spiritual have their seats in the Upper House by virtue of the occupancy of their see: translation to a new see requires being reintroduced into the Lords.

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