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Will consumers benefit from a breakup of the UK banking sector?

As the newly appointed Banking Commission looks to hit the ground running and suggest significant changes to the UK banking sector there are concerns as to whether consumers would benefit from any proposed breakup of UK banks. It seems that many in the government are adamant that larger banks in the UK should separate their investment activities from their retail activities to produce greater transparency and reduce the risks associated with retail banking.

While there is no doubt that in many cases retail banking activities in the UK have been forced to support investment banking operations in difficult periods, there is also no doubt that investment banking has had a long-term positive impact for many retail banking subsidiaries. Many of us forget that risk-taking in the financial arena has created many new financial tools and many new financial markets over the years. Without a retail division to offer support to the investment banking division, or vice versa, we are likely to see a significant reduction in "calculated risk taking".

There is a possibility that ultimately consumers will suffer if large banking corporations are broken up and investment banking and retail banking divisions are not allowed to "support each other".

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