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Paul Myners calls for simple structure to UK banks

City Minister Paul Myners has today called for the UK banking industry to be simplified and some of the more complex arrangements in the UK banking sector to be spun off from traditional banks. It is no secret that over the last few decades the financial industry has become more and more complicated with new tools and new investment ideas hitting the headlines on a regular basis. As a consequence, it can be very difficult to obtain a snapshot of a company's potential liabilities as so many of these investment schemes are interlinked with other investment tools.

Indeed the collapse of the worldwide financial sector was in the main traced back to complicated mortgage funding derivatives which many financial companies around the world bought into but did not fully understand. When the market collapsed we saw a domino effect which spread right through the sector and impacted upon investments which had otherwise appeared to be relatively stable.

However, while it is easy to say that the structure of UK banks and UK financial companies should be simplified, there is no doubt that the vast majority of the growth in the UK banking industry has come from innovative derivative arrangements and other investment tools. There is a need to find a balance between high risks and a free-market economy, while looking to maintain the long-term growth trend of the worldwide financial sector.

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