UK: Darling confirms government to break up too big to fail banks

>

In a clear break with US economic policy, the UK government have decided that too big to fail is too big to exist. As a result, three large financial institutions now owned at least in part by government are to be dismantled. Moreover, talk of Tesco’s or Virgin getting the assets is yet another momentous shift in the British banking landscape.

The BBC reports:

Chancellor Alistair Darling has confirmed that Lloyds, RBS and Northern Rock will be broken up and parts sold to new entrants to the banking sector.

He said there could be three new High Street banks in the UK over the next three to four years as a result.

But the chancellor said he would only sell parts of the banks when "the time is right", to ensure taxpayers get their money back.

There is speculation that buyers might include Tesco and Virgin.

One should not understate the importance of this decision. This is a game-changing move by the UK government. One year ago, it was the U.K.’s decision to recapitalise its banks which changed the economic policy landscape. U.S. policy makers were forced to switch TARP policy from buying up dodgy assets at inflated prices to injecting capital (see my post “Recapitalising Britain” from 7 Oct 2008).

Yet again, the British are leading the way in reform. If you recall, just two weeks ago Mervyn King, the Governor of the Bank of England, made a blistering attack on government policy and advised breaking up too big to fail banks. At the time, Prime Minister Gordon Brown publicly rejected this idea.

via creditwritedowns.com

The right things are starting to get done - now Mr Geithner???