'Split the Banks' Says OECD Director
February 20, 2013 • 11:19AM

The Organization for Economic Cooperation and Development (OECD) published a call to "Split Up the Banks" on its website Feb. 18, written by its Diretor General, Angel Gurria. The call, "A Bank Divided Can Stand", was reported in the Wall Street Journal-Europe on Monday.

Gurria's statement Says that the OECD called for breaking up the banks already in 2009. "From the outset of this financial crisis, the OECD has argued for clear and intelligible bank regulations. The ground has now begun to move in our direction," he writes. "First, we need a simple leverage ratio".... Banks are still short of the capital required to conduct business safely. This is especially true in Europe, where 700 billion [euros] may be required to bring banks better into line....

"Second, as we first proposed at the G-20 summit in 2009, the separation of commercial banking from large-scale proprietary securities businesses, notably in derivatives, is essential to avoid the cross-subsidization of excessive risk-taking linked to the too-big-to-fail phenomenon. We provided research to support this case to the U.K. Independent Commission on Banking."

Gurria's statement does not endorse restoring/legislating the Glass-Steagall Act; he says that the OECD now supports the "electrified ring-fence" policy now in the British Parliament, which imposes Glass-Steagall after one year if the regulatory efforts to split commercial banking from securities speculation fail.