UK banks are way too big.
In terms of assets, the largest bank - RBS - is significantly larger than UK GDP. The next two banks; Barclays and HSBC, are almost as large as GDP. Moreover, the fourth bank - HBOS - is about to merge with the fifth largest bank - Lloyds. When the merger is complete, that bank too will be almost as large as UK GDP. In short, the UK's four largest financial institutions are each as large as the UK economy.
These banks are far too large to be healthy. The UK economy is not large enough to bail them out. Whether New Labour it or not, the banking system must be downsized.
(The data source is Ed Harrison's Credit writedowns; website. Ed recently did a great post looking at Europe's 25 largest banks. Three out of the largest five were from the UK. No surprises there.)