Split banks into retail and high-risk units, report urges

Banks should be dividedinto high-street deposit-taking banks for ordinary customers and separately capitalised institutions that carry out high-risk trading to reduce the possibility of taxpayers paying for reckless behaviour by bankers.

The report for the European Commission from a group of 10 led by Bank of Finland governor Erkki Liikanen wants more action to prevent the kind of housing bubbles that brought Ireland to its knees, tighter controls over staff bonuses and tests for bank management and board members.

Mr Liikanen said the aim of the proposals was to “get rid of a system where profits are private and costs are public”. But the report was criticised by some as not giving European banks the kind of radical overhaul they need while others praised it for suggesting the next steps towards getting them firmly under control.