Call for tougher rules on banks

Andy Haldane argues that big is not necessarily better when it comes to banks

The UK needs harder hitting financial regulation, according to one Bank of England director.

Andy Haldane dismissed claims that tougher financial rules could tempt some banks to leave the UK.

If part of Britain's financial industry left because they didn't like tougher regulation, that might be a "price worth paying", he said.

There was no evidence of "bigger being better in banking", he told the BBC's Business Daily programme.

He also dismissed arguments by the banks that they needed to be big to compete globally.

ANALYSIS By Steve Evans, Presenter, Business Daily, BBC World Service Andy Haldane is one of the Bank of England's leading thinkers on the future of financial regulation. He is helping drive the Bank's part in international efforts to put in place a more robust system of rules for banks and financial institutions. However, in a speech earlier this year he warned that new rules, by themselves, might not be enough to restore consumer confidence. To repair public trust, he says, it would be preferable if banks were seen to be initiating reform themselves, rather than having it thrust upon them by regulators. 'Big is not better when it comes to banks'

"Bigger certainly isn't better when the going gets tough. Bigger during this crisis has meant bigger bail-outs, not better bail-outs," he said.

However, he also rejected calls by some critics for banks to be broken up, or that the phrase "too big to fail" simply meant that they needed to be smaller.

Instead Mr Haldane said new regulations could be put in place to ensure that banks were less vulnerable to failure in the first place.

First, by making banks keep more of a financial safety cushion, and also by re-organising them.

This would mean that if the riskier part of a bank were to fail, it would not cause the failure of any High Street operations as well.

Mr Haldane is the Bank of England's executive director responsible for developing its policy on financial stability.

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