UK bank chiefs not happy about breaking up of banks

Breaking up of big investment banks will not necessarily minimise competition, British banking chiefs told a Parliamentary committee while speaking to them as part of a probe into banking competition yesterday.

''This is an enormously competitive market and I am not sure that dividing banks further would give a better outcome. Concentration does not lead to lack of competition,'' said Eric Daniels, the chief executive of Lloyds Banking Group.

The Independent Commission on Banking has been studying competition in the sector, and there is a threat it will order Lloyds to be broken up when it reports late next year.

Daniels, however, said he would welcome the government's eventual selling down of their stakes in the part-taxpayer-controlled banks. The UK government holds 41 per cent stake in Lloyds. The government is sitting on a paper loss of about £2bn on that stake.

''Certainly I think the presence of any abnormally large shareholder impacts the stock and the other shareholders'', Daniels said.

He, however, said the timing of the sale of that stake was an issue for UK Financial Investments, the body that holds it, but said he would ideally like a more even shareholder base.