The UK government wants stability in its financial system. But Neelie Kroes, the Dutch EU competition commissioner, wants creative destruction among banks. Indeed, she has warned that she may try to break up Lloyds and RBS – two large lenders that are currently benefiting from state aid. The Treasury should heed her warning.

In some regards, banks are not like other companies. When one collapses, they can pull down other institutions in the financial network. And when there is widespread financial panic, the real economy suffers as basic credit services break down.