Thursday, 1 September 2011

Banks must split

There are few lobbies as loud as the claret-toned bray of the banks, and few ears as receptive to the molar drawl as Boy Dave's. The CBI have revealed their bias, and the Midlands SME owner must now wonder why he subscribes to a body that seems to be little more than a branch of the British Bankers Association. The split of the retail arms from the buccaneer operations of the banks is both inevitable and necessary - it is, after all, the investment side that holds some $10 trillion of worthless derivatives, and care must be taken this liability stays out of the retail side of the books. 

Vince Cable and George Osborne must stay their course on this and Dave will have to let his chums down this time.  


John said...

" The split of the retail arms from the buccaneer operations of the banks is both inevitable and necessary"

I disagree. It was the retail arms that got banks into massive amounts of trouble by lending money to people who couldn't afford it, on properties that weren't worth it. It was only the ingenuity of the investment side that turned shit into fools gold that kept things going for so long.

Deal with the cause not the symptom.

English Pensioner said...

The left-wing have regularly claimed that the Tories are the party of Big Business, and I am beginning to have some sympathy with this view. Yes we have to get things moving, but judging by the way contracts are given out by MoD, to the benefit of the companies rather than the servicemen, by the way the NHS contracts are let, to the benefit of anyone but the patients, it seems clear there is some merit in the left-wing view.
If the government fails to do anything about splitting the banks within a reasonable time-scale, it will prove to me that they are on the side of money, not the taxpayer.

outsider said...

It disappoints me how those who advocate free markets and global competition suddenly become Little England fans of social engineering and state restructuring diktats when it comes to banks, utilities et al.

Does anyone think that bank restructuring will lead to a vast appetite for lending to small business that did not exist before?
Banks overlent because they would be lowly rated on the stock market and taken over if they were prudent.

If we create new low-growth banks they will be taken over by foreign competitors (since domestic mergers would be barred). Santander, the biggest foreign owned bank in the UK, has not shown any interest in the small business loans market, partly because it does not fit in with the general model of low-cost high-volume lending based on credit ratings and commission-chasing branches.
If we want safe banks, the simple answer is for the state to stop distorting the market in order to foster competition artificially.
Simply announce that taxpayer deposit guarantees will be abolished in three years time and you will find the branch banks falling each other to demonstrate that they are the safest institutions around. Otherwise, people will flood to the Nationwide and the Co-op.

Anonymous said...

It should always be mandatory [blame Clinton] and expedited forthwith - the separation of whizz kidz lottery gamblers, with staid commercial [proper] banking.

The sooner the masters of the universe have to borrow money on the open markets to play with instead of using my dosh, backed up by me as lender of last resort, the debacle of 08/09 will always be waiting to re-occur.

Separation is the only way.

Trouble is, Georgie is mates with the "bankers", euphemistically called.