LORD Adair Turner, chairman of the Financial Services Authority, will tomorrow add fresh fuel to the row about whether banks are "too big to fail" when he calls for further debate on the creation of "narrow banks".
At a pivotal conference in London, the chairman of the City watchdog will question whether UK institutions should be forced to split into retail and investment banks amid ongoing concerns about the structure of Britain's financial market.
Calls fo
r banks to separate their retail operations from riskier investment banking practices have regained momentum in recent weeks after Bank of England governor Mervyn King warned at a dinner in Edinburgh that regulation alone would not be enough to curb excessive risk taking.
US President Barack Obama last week unveiled a "too big to fail" plan for American institutions, which will hand regulators the power to police and restructure large banks that are deemed to be threatening financial stability.
European competition commissioner Neelie Kroes also opened the door to a system of smaller banks in Europe when she ruled last Monday that Dutch heavyweight ING be divided along banking and insurance lines.
Two days later, the EC announced that nationalised Northern Rock would be split into a "good bank" and a "bad bank".
A spokeswoman for the British Banking Association said: "We are not opposed to revised regulation but would urge effective and proportionate regulation."
