UK Finance Minister George Osborne made comments at the G7 that no bank is too big to fail. Combine this with comments global financial institutions saying banks cannot be allowed to fail, and the logical conclusion is that bank break-ups are on the cards. That's a hot potato that politicians don't want to tackle at the moment, says BGC Partners' Mike Ingram.
"(QUESTION: Did we get anything out of the G7? I know there are little bits and pieces. Osborne made some comments on some of the banks, but anything of substance for you?)
Well I think it was a couple of interesting things. I mean the first was that Osborne's statement that no bank is too big to fail and that's interesting because there are a number of as you say, global - sorry.
(QUESTION: No, go ahead.)
Very, very global important financial institutions which they said they cannot let them fail. So if you're saying that there is nothing out there that's too big to fail, then by implication, you're going to be starting to talk about breaking these banks up. Now this is something that's been mentioned on and off by a number of commentators for sometime but is something that the politicians don't want to tackle right now.
(QUESTION: Eurogroup is today. Ahead of that, we've had Schaeuble, the German Finance Minister saying he wants a limited banking union. More talk from them on this banking union. How far back is that going to put things?)
Well it certainly seems like the deadline for March next year is really off the cards and that was looking quite clear for some time. It was also a very challenging deadline. I think the issue for Germany ultimately is they want to do banking union on the cheap. They don't want Germany to be on the hook for any more banking bailouts. That's the reason why they've been back-peddling for the best part of the 12 months now on any banking bailout from the ESM. And interestingly enough, one of the things which Germany now seems to be worried about is the resolution mechanism where they're saying well we need to get some of these banks wound up very quickly, but you know what, we're not going to pay for them.
(QUESTION: I just want to mention, I know we're going through quite a few things quite quickly. This Italian retreat in Tuscany, Letta, the new Prime Minister warning of the future of the government's at risk after Berlusconi made an attack on magistrates over the weekend, what do you make of all of this?)
Well I have to say that even when Berlusconi finally came on board in this coalition government with Letta, I mean the signs weren't good. Berlusconi had a long list of demands basically either to keep himself out of jail or to protect his own personal interests. We have to stay fairly consistent there and that wasn't necessarily going to sit well with Letta's government. So I would have to say that even if the government in Italy does push through a few measures, it has very, very limited shelf life and we're seeing some of that right now."