Archbishop of Canterbury, on bank reform panel, calls for a UK bank breakup

At least one of Britain's major banks should be broken up into smaller regional lenders, the Archbishop of Canterbury, who sits on an influential banking reform committee, said on Monday.

Justin Welby, spiritual head of the Anglican Church, spoke in a personal capacity, but his comments offer insight into the thinking of the Parliamentary Commission on Banking Standards which has the role of cleaning up Britain's banking culture.

"In simple terms, we need to recreate the local, and the easiest way to do that, as well as bringing new entrants in, is to kill two birds with one stone by recapitalising at least one of our major banks and breaking it up into regional banks," Welby told an audience in London that included business leaders and politicians.

The commission is due to publish a report in May on how to address the ethical problems in the City of London exposed by a series of scandals. The report should also look at the impact on competition.

Chancellor George Osborne set up the commission last year after Barclays, one of the oldest names in British banking, was fined $450 million (294.3 million pounds) over the manipulation of global interest rate benchmarks.

Welby, a former oil executive at France's Elf and London-based exploration company Enterprise Oil, was named head of the Church in November and sits in the upper house of parliament. Prime Minister David Cameron has spoken of the value of his corporate experience.

He said one step to address the problems highlighted by the near collapse in 2007 of mortgage lender Northern Rock, was to take lending decisions out of the global financial hub of London and into the communities directly affected by them.

Welby also backed greater transparency through the creation of a 'good bank, bad bank' system - echoing the thoughts of other lawmakers on the committee.

Only recommendations that are supported by every member of the commission, made up of nine men, including a former investment banker, and one woman, a former executive with Citigroup, will be put forward, its members told Reuters.

Osborne does not have to implement their proposals but given that he created the commission, it is believed likely that at least some of the recommendations will be taken up.