US senators push for new legislation to separate banks

12 July 2013

Senators in the US have introduced a new piece of legislation that will separate commercial and investment banking.

The new plan will see a wall placed between the two sectors so traditional banking can be kept away from the more risky financial activities. It is modelled on the Glass-Steagall Act of 1933 and there have been many previous attempts to revise it in recent years, all of which have failed.

This new attempt has received backing from republican senator John McCain and democrat Elizabeth Warren.

While the act would re-establish a boundary between traditional consumer banks and riskier financial instruments like investment banking, it could also potentially reduce the size of institutions that are too big to fail.

In a statement, Mr McCain said: "Since core provisions of the Glass-Steagall Act were repealed in 1999, shattering the wall dividing commercial banks and investment banks, a culture of dangerous greed and excessive risk-taking has taken root in the banking world."

By Tony Aynsley

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