Banks must be able 'to fail safely'
The head of the commission examining the potential break-up of Britain's biggest banks has said there needs to be a way of allowing unsuccessful financial institutions "to fail safely".
Sir John Vickers used a speech in London to give an insight into the investigation by the Independent Commission on Banking (ICB).
He said that it should not be down to taxpayers to provide "a generous safety net" to stop banks from collapsing.
The ICB was unveiled by the coalition Government last June to consider reforms to the banks that would "promote financial stability and competition".
Speaking at the London Business School, Sir John said: "For the most part, retail customers have no effective alternative to their banks for vital financial services, and hence there is an overriding economic, social and political imperative to avert any disruption to the continuous provision of those services.
"The task is to find better ways of ensuring this, if possible, while allowing unsuccessful individual institutions to fail safely."
He said that although customers of investment banks were more able to "look after themselves", it was vital to find ways for these services to fail safely too.
"Ultimately, financial risks have to be borne, and in a market system they should not be borne by the taxpayer providing a generous safety net," he added.
Chancellor George Osborne said he was pleased Sir John was asking "tough, searching questions about how we protect taxpayers".