Coalition told to save banks

BREAKING up banks such as HSBC would be “an act of vandalism” which would profoundly damage Britain’s standing as an international financial hub, an influential industry magazine warns today.

Institutions with strong overseas operations would move abroad, while those who remained would be severely weakened, according to The Banker. The journal, which published its index of the top 1,000 world banks this morning, urged caution a month after the coalition government launched a fresh commission which is expected to recommend the separation of retail and investment banking operations when it reports next year.

A fortnight ago, business secretary Vince Cable said there was a “clear direction” towards a break-up of the sector along Glass-Steagall lines.

Brian Caplan, editor of The Banker, said: “If the coalition government decides to break up banks it considers ‘too big to fail’, this could have catastrophic effects on the UK’s leadership in the international financial industry. Britain would effectively be handing that role over to American, European and even Chinese banks.”

Caplan said banks were beginning to recover after a period of extreme difficulty, adding: “Taking the axe to a blue-chip British company like HSBC would be an act of vandalism.”

The Banker’s annual survey, which is closely watched in the Square Mile, put HSBC, Royal Bank of Scotland and Barclays among the largest 10 lenders around the globe by capital strength. Despite the turmoil of 2008 and its disastrous acquisition of HBOS, taxpayer-owned Lloyds Bank of Scotland was ranked 12th, having improved its tier one capital ratio by a greater degree than any other institution.