Bankers say don’t mess with us – classic special interest pleading
Another day, another Mandy Rice-Davies moment. Our bankers seem to be getting their mates on the case of helping them avoid the consequences of their actions. The Item club is warning of all sorts of doom and destruction if we swap universal banking for investment banking and retail banking. Well, actually they say we’ll lose 0.3% of GDP.
Now I’m not so sure that’s a bad deal. We lost an awful lot of GDP when it all went titsup in 2008, so perhaps a little bit less in exchange for not having a near death experience might be okay. I think Vickers is tackling the wrong thing. Instead of creating a general form of the Glass-Steagall Act, howsabout making FSCS compensation conditional.
If a bank wants to offer an account protected under the FSCS then it has to operate as a retail bank and ringfenced. No compulsion, but then strip FSCS compensation from the likes of Barclays and the rest of the BSD brigade. And force them to print a health warning on all their ads in no less than 8pt type for a magazine ad to the effect of
This account is not protected by the FSCS. You may lose all your money if we screw up like we did in 2007/8
and print this on the bottom of every statement, email and other bank communication. Widows and orphans will go with the retail banks, and the sort of people that were attracted to Icesave will go with Barclays and their ilk.
Retail savers don’t need a universal FSCS protection scheme. We just need the option. I’m happy to save in a shares ISA, knowing that I could lose most of it in a market crash. However, I’d like to have somewhere I could park cash without the same feeling that it could all die quietly in the night. I don’t expect cash to give me a return, I’d just like to find it still there when I come back for it.
Others of a more racy disposition might want to take their chance with Barclays, and presumably be compensated with more interest. As long as their noses are continually rubbed into the fact they are giving BSDs the use of their money and they have a history of good returns combined with total annihilation then that’s fine. Consumer choice is what capitalism is meant to be good at, so if Barclays and their buddies want to gamble with their customers cash then let them – as long as the customers are easy with the risk.
Bankers are so spectacularly arrogant it defies belief. You really have to meet them and talk about the past three years to realise that we should never trust them further than we can throw them.
Case in point: The UBS blow up this week. We’re supposed to regulate a bank from the outside, looking in, when it can’t track an unauthorised $2 billion trade? Madness.
> Bankers are so spectacularly arrogant it defies belief
Must be the old power corrupts thing 
Martin Wolf from the FT seemed to indicate UBS has already failed once before. The head honcho seems to have gone for the old “nothing that could be done, nothin to do with me” line.
The scandal has threatened to engulf Oswald Grübel, UBS’s chief executive. However, he told the Swiss media over the weekend that he will not quit and does not feel guilty for the losses suffered on his watch, which will push the bank into a third quarter loss.
“If someone acts with criminal intent, you can’t do anything,” he said. “That will always exist in our job. If you ask me whether I feel guilty, then I say no.”
Makes you wish for the integrity of Truman’s the buck stops here line. Perhaps it should be one of the strings attached to being bailed out by the taxpayer in future that the CEO and board accept command responsibility. It’s the ‘nothing to do with us, couldn’t be foreseen’ crap that is galling!
“Retail savers don’t need a universal FSCS protection scheme”
Amen to radical liberalisation! The “Narrow Banking” stuff from John Kay et al seems very attractive to me.
I’d be intrigued to see how well this type of thing would go down with the general public, though. I rather think they are now quite fond of the taxpayer backstop to their cash.
F-all chance of seeing anything truly radical out of this lot, IMO.