Megabanks have had their day, says Weill

By Richard Blackden

THE executive who created the world's first "megabank" - to combine retail lending and corporate investments on an unprecedented scale - has called for the biggest banks to be broken up because they have become too risky.

The call from Sandy Weill, who led Citigroup in the 1990s, reverberated across the City of London and Wall Street yesterday. Mr Weill was an aggressive proponent of the argument that in the age of globalisation the world needed vast banks that do everything, from taking customers' deposits to engaging in complex trading.

It was a view that culminated in 1998 with his engineering of the $70bn (£45bn) merger of Citicorp and Travellers, a financial services company he led, to create Citigroup and make it the world's largest bank. At the time, he described the bank as "a model of the financial services company of the future". Yesterday he said such banks pose too big a threat to taxpayers.

"I'm suggesting that they [the banks] be broken up so that the taxpayer will never be at risk, the depositors won't be at risk, the leverage of the banks will be something reasonable," said Mr Weill. The bank he created and was chairman of until 2006 was forced to turn to US taxpayers for a $45bn bail-out in 2008.

Mr Weill's intervention comes as the Libor scandal and multi-billion dollar trading losses at JP Morgan have raised fresh questions on both sides of the Atlantic on how to regulate the biggest banks. George Osborne has resisted calls for a full separation of retail and investment banking at Royal Bank of Scotland, HSBC and Barclays.

In the US, President Barack Obama has also decided against trying to split the country's biggest banks and opted instead to ban certain banking activities and increase regulation.

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