Lord Turner would prefer banks to hoard more capital to guard against future problems rather than to become smaller
Britain's top financial regulator today set himself on a collision course with the Bank of England after warning that forcing banks to slim down would prove too problematic.
Addressing the Treasury Select Committee today, Lord Turner, the chairman of the Financial Services Authority, dismissed suggestions made last week by Mervyn King, Governor of the Bank of England, that if a bank was too big to fail, it was simply too big to operate.
Lord Turner said that he favoured an approach where larger banks would be forced to hoard more capital to absorb the shock of risky trades. The difference of opinion between Mr King and Lord Turner sits at the heart of a debate among politicians and regulators over whether to compel banks to carve themselves up to separate retail and investment banking divisions.
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