Breaking up banks into smaller entities isn't going to prevent one bank collapse destabilising the rest. If small banks were the solution to economic stability then the Great Depression with it's unit banking laws and a separation of commercial and investment banking ought to have been a golden age, which as the term "Great Depression" it really was not.
“It is always difficult to say ex ante that you would never intervene to save a particular sort of bank,” he said. “In Lehman, for example, there wasn’t a single retail deposit, but the then American administration allowed it to go down and that brought the rest of the system down on the back of it.
“You could end up dividing institutions and making them separate legal entities but that isn’t the point. The point is the connectivity between them in relation to their financial transactions.
“Equally, the large-small thing doesn’t run. Northern Rock was very small in global terms but systemically it was quite important when it got into trouble.”