Sean O'Grady: First the £1.2 trillion bailout. Now it's payback time

When was the last time a British bank offered you some exciting new product? Have a think.

No? Proves the point: too much power has been held in too few hands for far too long in banking. Since the cataclysms, collapses and forced mergers of the past two years that lack of competition has grown grotesque.

Now the Treasury is about to change that and do something rather clever. Wave your cheque books in the air and rejoice.

First, ministers are sensibly going to follow the "good bank/bad bank" model, split up Northern Rock and secure for the taxpayer some return on our vast "investment" in it. It is making the best of a bad job. As critics of the good bank/bad bank model argue, it will leave the taxpayer holding a stinking pile of what are euphemistically termed "troubled assets", that is, worthless paper. But no one is ever going to want those anyway. Best to cleanse the Rock and create a vigorous competitor for the big banks, either independently or owned by the likes of Virgin or Tesco (though some of us worry about how much power Tesco is developing over our lives).

Second, the elephantine banks now semi-nationalised – RBS and Lloyds – are to be broken up. Let us recall that RBS includes NatWest, and Lloyds, amazingly, owns Bank of Scotland, TSB and Halifax. All of these "brands" were once sizeable independent entities. That variety needs to be re-established. But the new retail banks that will be created must be kept as "narrow", utility-like, banks. They must be kept out of casinos. Given the pain of our £1.2 trillion banking bailout, it is not much to ask.