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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2010/11/government-warned-over-bank-system.jpg"><img class="alignnone size-full" title="Michael Meacher says the British banking system is the most 'dysfunctional' in the world" src="http://londonglossy.com/wp-content/uploads/2010/11/min-government-warned-over-bank-system.jpg" alt="Michael Meacher says the British banking system is the most 'dysfunctional' in the world"/></a></p>
<p>Britain has the most &#8220;profoundly dysfunctional banking system&#8221; of any G7 country and must be overhauled, the Government has been warned.</p>
<p>Labour former minister Michael Meacher criticised the UK&#8217;s banking model, which links &#8220;speculative investment with retail deposit-taking&#8221;, citing this as a major cause of the economic crisis.</p>
<p>He also hit out at &#8220;extreme light touch regulation&#8221; of financial institutions that &#8220;left too much to the markets&#8221;.</p>
<p>Opening a backbench-led debate on banking reform, Mr Meacher told ministers: &#8220;At present Britain has, and I don&#8217;t think this is an exaggeration, the most profoundly dysfunctional banking system of any G7 country, and it came nearer to collapse than any other in the autumn of 2008.</p>
<p>&#8220;I believe we need to break up the mega banks with their addiction to mortgage lending.</p>
<p>&#8220;We need smaller banks, we need in particular specialist business banks, infrastructure banks, housing banks, green banks, creative industries banks, and all the others.</p>
<p>&#8220;Only this kind of fundamental reform of the banking system can provide the foundations for the economic and social transformation of this country which we all want.&#8221;</p>
<p>He said the financial crisis was caused by various factors including an &#8220;overlax&#8221; monetary policy, the development of credit derivatives, a banking structure which allowed banks to be &#8220;too big to fail&#8221;, and the role of &#8220;enormous bonuses which drove the recklessness&#8221;.</p>
<p>Mr Meacher (Oldham W and Royton) called for a separation of investment banks from retail banks, warning that the taxpayer guarantee on retail deposits currently provided &#8220;collateral&#8221; for financial trading.</p>
<p>&#8220;The crux of this model is that the withdrawal of the taxpayer guarantee would be a sufficient deterrent to protect investment banks engaging in highly risky investment which might collapse with serious and far-reaching consequences for the national economy,&#8221; he said,</p>
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