Oral question asked in the House of Commons, by Dari Taylor (Labour). It was answered on Tuesday, 2 February 2010 on behalf of the Treasury.

Financial Sector

Question: Is it not the case that banks that mainly handle hedge funds are seen by many as casino banks? Is it not time that we looked at that world of hedge funds and separated their activity in banking terms from that of banks that handle everyday mortgage and saving—that is domestic—needs?

Answer: I do not think that the division that my hon. Friend provides is quite as simple as that. Hedge funds can perform a useful function, but it is important to ensure that, when banks engage in risky activity, they have sufficient capital behind them if things go wrong. That is why we are very happy to work with some of the proposals from the United States and, indeed, other parts of the world. Most people recognise that the situation is quite complex, and I see that the Opposition have now shifted their position from warmly embracing the break-up of banks to an assurance, which the shadow Chancellor gave to bankers at the weekend in Davos, that they would not do any such thing.

Secondary information