June 30 (Bloomberg) -- HSBC Holdings Plc Chairman Stephen Green said that the world financial and economic crisis is “far from over” two years after it began.

“We are almost two years into a financial and economic crisis which is far from over,” Green told a conference in London today. “We cannot even say we are past the worst.”

Britain’s economy shrank by 2.4 percent in the first quarter of this year, more than previously estimated, in the biggest contraction since 1958, the Office for National Statistics said today. Last week, the World Bank said the global recession this year will be deeper than it predicted in March and warned that a flight of capital from developing nations will swell the ranks of the poor and the unemployed.

The global economic crisis is “not just a cyclical downturn” and foreshadows a “fundamental reshaping of the industry,” Deutsche Bank AG Chief Executive Officer Josef Ackermann, 61, today said in a speech in Potsdam, near Berlin.

Green, 60, also described as “fantasy” the idea that smaller “narrow” banks provided the best way to return to financial stability.

“Customers, both businesses and individuals, need a wide range of services,” he said. “To force them to go to different types of institution for different services, according to some resurrected Glass-Steagall model, would be totally unrealistic.”

Depositor Protection

The British government is considering regulatory change to protect depositors after lenders including Royal Bank of Scotland Group Plc came close to collapse last year, people with knowledge of the situation said last week. HSBC and Barclays Plc may be asked to ring-fence their securities units so they could potentially be wound down without systemic risk, under plans being considered by the U.K.

Breaking-up the U.K.’s big global banks would reduce national competitiveness and force customers to use overseas lenders, Angela Knight, chief executive officer of the British Bankers’ Association, told the same London conference.

It was clear that banks needed a “significant increase” in capital “in certain circumstances, proportionate to risk,” Green added.

“International banking is in a bit of mess, it is not in great shape,” Standard Chartered Plc Chief Executive Officer Peter Sands, 47, told the London conference. Lenders “are pulling in their horns everywhere” and selling operations, he added.

“Overly complex, opaquely priced products got banks into trouble,” he said. “Overly complex, opaque regulations simply cannot be the answer.”

To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net

Last Updated: June 30, 2009 08:02 EDT