Brown rejects King's proposal for big bank split

Published on Wednesday 21 October 2009 21:56

PRIME Minister Gordon Brown has dismissed a suggestion by Bank of England Governor Mervyn King to split the retail and investment divisions of banks.

Mr Brown insisted that a failure of regulation, rather than the mixing of the high street and "casino" arms of banks, was to blame for the near collapse of the sector.

Mr Brown told the Commons yesterday: "Northern Rock was effectively a retail bank and it collapsed. Lehman Brothers was effectively an investment bank without a retail bank and it collapsed. So the difference between having a retail and investment bank is not the cause of the problem."

Meanwhile, new figures show Scotland's economy shrank for the fourth successive quarter. But the decline, of 0.8 per cent, is smaller than in the last two quarters, according to the figures for gross domestic product.

There was further good news as the CBI said Scotland's manufacturing sector saw a return to growth in output and orders in the three months to October.