It is not yet clear exactly what the proposals will actually be to secure the retail side of banking from the investment or casino, side. Many, including it is said the Bank of England Governor Sir Mervyn King, would like completely separate companies with no linear connection. The Chancellor’s plan may fall short of this, hence reference to fences and walls. The trouble with those is that fences and walls can be broken down or climbed over.
We therefore need to be clear about what is required. This is the freedom of vast universal banks to collapse with total shareholder loss, without affecting the domestic financial structure of the retail or High Street banking system. The prospect of that happening will do much to curb the wilder aspect of what has become almost a casino sport, as shareholders grasp that ruin will be the product of over confidence and greed. In addition the retail banks must be returned to the level of stability and probity they enjoyed prior to Big Bang, with the additional statutory requirement that any rescue by taxpayers requires the transfer of all the shares to public ownership for £1.
The simple truth is that the public are no longer willing to allow shareholders to own and profit from banks which taxpayers have to rescue when the folly of bad practice leads to disaster. In such a moment it must be clear that taxpayer to the rescue means taxpayer takes all.