UK commission mulls breaking up big banks

A UK government commission set up to seek reforms in the country's banking industry, is mulling whether breaking up its big high street banks is a necessity after taxpayer's money was pumped into some big banks to save them from collapse during the global financial crisis.

As the Independent Commission on Banking (IBC) seeks to reform and restructure its big banks, it is examining whether splitting bank's retail and investment operations would be a wiser decision than bailing out large banks in case of a future financial crisis.

This tricky decision will, no doubt, be opposed vehementaly by British banks since only six banks hold nearly 90 per cent of all deposits in the countr - a figure considered too high by economists compared to the US or Germany.

During the global financial crisis of 2007-2008, the UK government had to pump in billions of pounds to prop up Royal Bank of Scotland, Northern Rock and Lloyds banking group, all of whom were considered too big to fail.

But banks like Standard Chartered, HSBC and Barclays have already threatened to quit Britain if the IBC recommendations on breaking up banks are followed through.

During the financial crisis, when the UK government forced banks to raise their Tier I capital ratio, Barclays Bank chose to dodge taking bailout money from the UK government because of its stiff conditions and instead opted for Middle East money.