Governments Must Let Failing Banks ‘Die,’ U.K. Lobby Group Says

Governments should let failing banks collapse rather than risk taxpayers’ money, according to Anthony Browne, chief executive officer of the British Bankers’ Association.

“We disagree with those in the European Parliament who believe legislation should enable governments to take failed banks back into public ownership in certain circumstances,” he will tell the Institute of Directors in London today, according to a copy of his speech obtained by Bloomberg News. “Whatever the political pressure, governments must be prepared to let banks die.”

Governments and regulators have done enough to make banks safer, by introducing higher capital requirements, providing guarantees on consumers’ deposits in the European Union, and devising plans to build firebreaks around consumer-banking units, Browne, 46, will say.

Taxpayers injected about 65.5 billion pounds ($99 billion) into Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc (LLOY), Britain’s biggest mortgage lender, to bolster capital amid the 2008 financial crisis. The U.K. was forced to spend, pledge and loan 850 billion pounds to rescue British banks by 2009, according to the National Audit Office.

“Money that could have been used to build hospitals or give tax cuts to those on low incomes was instead used to prop up major financial institutions,” Browne will say. Institutions “paid bonuses that were beyond the wildest dreams of most of the people whose taxes were bailing them out,” Browne will say. “There is nothing free enterprise about that.”

-- Editor: Jon Menon

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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