Outlook Mervyn King is at it again. Governments on both sides of the Atlantic may have resolved not to break up the banks, but the Governor of the Bank of England continues to insist that any reform has not gone far enough if it leaves intact organisations deemed too big to fail. Mr King last night outlined several ways in which the problem might be addressed, but it is clear that he favours a much more aggressive intervention than any government has so far proposed.

The Governor's increasingly strident tone on this issue is entirely justified. For all the talk of outrage about the behaviour of the banks – and the focus on bonuses which, in the grand scheme of things, are a side issue – we have been remarkably reluctant to tackle the central problem head on. For as long as the world has banks whose collapse would pose a systemic risk, the world – that is the taxpayer – must act as their guarantor of last resort. The massive scale of taxpayer support for these institutions over the past two years may have been abhorrent, but if they continue to exist in their current form, the implication will always be that we will provide such support again should it be necessary.

The arguments so far presented for not returning to legislation similar to the Glass-Steagall act repealed in the US 10 years ago do not stack up. Chiefly, the objection seems to be that finance has grown too complicated and international for legislation enforcing a strict separation of retail and investment banking to be practical.

That, however, is a smokescreen. The real reason for the caution is that even after the crisis we have been through, the nerve and will to take on the banks is still not there.