Bank of England Governor Mervyn King said Tuesday that U.S. government proposals to curb the size and activities of commercial banks make it clear that radical reforms are now on the table, and it is important to consider such options.
Speaking with lawmakers, King said it isn't realistic to think that a financial system could be designed that would prevent future crises from occurring. The more sensible approach is to make it resilient enough so that troubles in one section cannot bring down the rest, he said.
King said he would like to see the development of a network of smaller, more specialist banks. U.K. authorities could unilaterally move to break up big banks if they thought such a move were desirable and were unable to reach international agreement on the issue, he said.
"The system that has the least to be said for it is the present system, the status quo. That's the one that's brought us financial crises of ever-growing severity," King said.
King urged lawmakers to keep all possibilities on the table and not disregard options before they have been considered in more detail.