Good for the European Commission. The news that ING, the financial services group, is now breaking up its banking and insurance divisions – and being forced to sell ING Direct USA – is one of the first times that a banking group has been properly humbled for its role in the financial crisis.
So far, national governments have largely avoided actually making banks smaller as the price for needed to be bailed out. Indeed, the trend has been in the other direction – Hank Paulson, the US Treasury secretary last year, pushed for deals such as Bank of America taking over Merrill Lynch.
There has been a spate of central bankers and former central bankers arguing for banks to be divided up to avoid the mingling of deposit-taking and “casino” activities such as hedge fund management.
The list of splitters (maybe in honour of Jonathan Swift they should be called “Little-Endians” as opposed to the government “Big-Endians” who favour keeping banks together and regulating them more tightly) now includes quite a roster of names.
Mervyn King, the governor of the Bank of England, has joined Paul Volcker and Alan Greenspan, two former chairmen of the Federal Reserve, in favouring banks being broken up.
That has led to a chorus from Treasury ministers (and even other central bankers) saying that dividing up banks is too tricky and the end of financial stability can be achieved by other means.
However, the EU competition authorities have ventured where national governments have been too timid in demanding that an effective price is paid for state aid. They deserve a pat on the back, I think.
