Bank ringfencing too hard, says John Kay John Kay, the leading economist and professor who produced a far-reaching review of the markets in the summer, warned on Monday that it would prove difficult to produce rules to ringfence a bank's steady retail business from its more risky investment operation. The professor, whose review of UK equity markets and long-term decision making in July was commended by the City and fund managers, told MPs at a hearing on banking at Westminster: "It will be very difficult to do this [separate retail from investment banking as recommended by Sir John Vickers in his review of the banking industry]." However, he said that reforms to shake up the banking industry after the financial crisis of 2007 were moving in the right direction. He was referring to new rules laid out by Paul Volcker, former US Federal Reserve chairman, on curbing banks from using their own money to bet on markets and reforms by Sir John on separating a bank's retail business from its investment banking operations. He added that the concept of a bank being "too big to fail" was not acceptable in a democracy. "The only thing taxpayers should stand behind are the deposit-taking side of financial institutions," he said. In other words, he was uncomfortable with governments bailing out the investment banking operations of financial institutions, which are highly leveraged and by their nature risky ventures. Referring to the Royal Bank of Scotland, he said the bank had a good small business lending unit. He felt the reconstruction of RBS, which had to be bailed out by the government, could have focused on this successful small business lending operation.