Another note here is that much of what brought down these UK banks was contagion, due to the bubble in commercial and residential real estate pricing and then to the spreading financial crisis and it's effects on chilling available financing and liquidity.
> In a way, universal banks tend to be more robust than a specialized bank, as it benefits from funding and revenues diversification (and cheer size to absorb losses)
This is not only an unproven claim, but a disproved claim. In the US, cross-breed banks resulted in greater contagion across the financial sector and put depositories at risk, increasing the need for bailout.
You could in theory get the best of both worlds by having a highly, highly regulated and constrained investment banking arm of a depository bank. But then how well would it compete with standalone investment banks? And would we really be able to ensure complete separation of risk between activities? Doubtful, in practice. This is a suboptimal set up.
Depositors in a bank do not deposit their money with the idea that it is going to be put at any significant risk. It's supposed to be effectively warehoused and insured. Taking complex and risky bets with deposits, or capital derived from or backed by a depository base of capital, makes no sense on first principles and the theory of combining operations for some benefit in diversification has been falsified in practice... the opposite happened, with higher degrees of correlation and contagion happening in reality.
> You can't send people to jail for making bad business decision
No, but we didn't pursue even a tiny fraction of the cases of negligence, let alone fraud. Also, reducing the discussion purely to jail time is a straw man. Civil penalties for individuals are perfectly justifiable, especially when you're well-compensated and when your decisions result in gross harm to the public.