Vince Cable: banks need reform, but what form must it take?

by , Business Secretary Money 26 July 2011
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At a banking debate this morning, Which? called upon the Independent Commission on Banking to be brave with its recommendations. Vince Cable joins us to explore how we can prevent another banking crisis.

Vince Cable

It’s 15 months since I worked with Which? on its Banking Commission, before joining the Coalition government. A group with disparate views came together to recommend unanimously a series of strong conclusions.

Its central point was that ‘banking is a structurally flawed industry that has failed its customers, its investors and the taxpayers who stand behind it.’ A year and a bit later, that verdict retains its force.

Banking needs structural reform

The Independent Commission on Banking (ICB) under Sir John Vickers was asked to look at the issue of structural reform in detail.

The Interim Report sets out carefully the argument for separation, or keeping banks’ risky investments away from your money. Traditional banking underpins a modern economy and has to be protected by the state from the risk of systemic collapse; that is not true of most wholesale and investment banking activities.

The implicit subsidy enjoyed by the banking sector effectively involves you, the UK taxpayer, underwriting bank’s high risk investment activities. When bankers have massive global exposure as they do in the UK, the public sector is taking on massive liabilities.

And since banks know that they are ‘too big to fail’ they have a big incentive to take excessive risk; and in the financial crisis some of those risks became a costly burden for the taxpayer.

We in government do not believe this is sustainable.

Will ring-fencing banks work?

The ICB recognised a trade off between the benefits of making banks safer through separation and the costs to the banks (some of which might be passed to their customers). It recommended separation through ring-fencing with retail banks having higher capital levels than now and wholesale/investment banks being sufficiently separate to allow them to fail in a crisis.

The ‘ring-fencing’ approach has been criticised for being insufficiently clear by those arguing for full separation; and by the banks themselves for going too far.

However, the ICB has made it clear that the huge advantage the UK currently has as a hub for the activities of global financial services is in no way threatened by further separation of investment and retail banking activities.

Key tests still remain

It is important to remember that this was an interim report. I have confidence in an independent commission of exceptional quality, but the ICB now has to provide convincing answers to some critical questions.

The government will still be seeking reassurance from the final report in September to demonstrate that a ring-fence can be as effective as full separation at lower cost. The keys tests will be:

  • Would it stop banks using deposits underwritten by the taxpayer to cross subsidise their ‘casinos’?
  • Will the ring-fence be high enough to eliminate regulatory arbitrage by the banks?
  • Will the division between what is inside and outside the ring-fence ensure that nothing resembling a universal bank remains?

We, as a government, shall await the report before coming to a firm conclusion. But once we have agreed a way forward it will be essential to put the new arrangements in place as quickly as possible; we cannot wait for another banking crisis to cause even more damage.

101 comments

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Sophie Gilbert

I also don’t want the fat cats who FAIL to be rewarded by bonuses people would be chuffed to win in the lottery and by a pension that pays more in a single year than what an average salary brings in a whole career.

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dean

Shouldn’t we ask News International what they would like to do about the banking crisis instead? ;-)

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Russ

Firstly I am not a banker Nor am I a financial expert so I am not about to give a biased answer.
The personal side of banking is subsidised by the business side of banking which would mean if there there was a split we would all have to pay to have a bank account, not every body will want to pay and can afford to pay for an account, this will mean financial hardship because if you dont have an account then you cant have a job and in most cases any form of tax credit that goes with it so we need to think hard about it.
Secondly before and when we all left school we had the chance to assist ourselves in a career path, some chose to do nothing and let the tax payer pay them for sitting on their backsides, by the way the bankers pay tax on their bonuses, once we all chose our careers in which ever field it is get paid the going rate for doing that job as do bankers, I run my own kitchen studio I am not a banker I would love to earn what bankers earn but I don’t because I chose this career. We have to be objective not jealous. Yes the financial crisis is partly down to banks but mostly down to government because they are the ones that turned a blind eye and cosied upto the banks just like they have to News International.

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Bill

Russ you dont have to bank with one of the big five. Pay your salary into a building society you get cards for ATM withdrawal + credit cards and cheque books,Morgage / consumer loans if you require them ect The mutuals are not involved in casino banking the 3 ex mutuals who turned themselves into banks Alliance & Leicester,Bradford & Bingley & Northern Rock all went belly up.

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holman

If you witnessed a mugging, would you blame yourself for not having a go or the police and the government for not anticipating it? The mugger should not be blamed since he is just following his chosen career path.

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Grabbler

What rubbish! We don’t ‘choose’ our careers when we leave school. Most of us have no idea what opportunities are out there at that stage in their lives and for some people they never do. We are guided into our occupations by our parents or extended families or inspirational teachers or other influential people in our lives. If our grandparents were made unemployed due to economic recession and our parents were unable to find work when they left school there is every likelihood that the only options available appear to be to muddle along on benefits and maybe making a bit on the side by whatever means become available. Education has been no use to people in this situation; teachers have little idea about the world outside academia and the subjects taught in schools appear to have little or no relevance to children in this situation. They become the scapegoats for governments to look as if they are cleaning up the economy when in fact it is thoroughly corrupt. The people who make the most ‘succesful career choices’ when they leave school are those with ‘successful’ role models, usually in their families, and particularly those who have benefitted from a private education at places like Eton, where they join the priviledged network, the elite that manage the country in which we live – be them investment bankers, politicians, top civil servants, corporations etc. The few exceptions that join that strata from less priviledged backgrounds are merely the exeptions that prove the rule and allow the corupt bunch including their media henchmen to blackmail the majority of people to accept their status in society.

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Adam

Reading the comments and the views to this post is actually quite scary.

If you want to make something of your life, get off your backside and do something. Don’t just be jealous of others. You (and your parents/upbringing) dictate your career path, nobody else.

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pickle

I agree with Vince Cable – ringfencing the retail part would be much safer although the banks would make this the excuse to put up charges. It might be worth it…..

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whobiggs

I would obviously like my savings to make me money but the main issues for me are first security. I cannot afford to lose it. It would be desirable to keep up with inflation (real inflation not false government figures) if possible but I am not prepared to gamble with it.

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holman

If ring-fencing is done right, it would work the same as if there are two separate companies. In which case, what are the arguments for NOT going for two separate companies? If there are any arguments, does that mean the ring fence will have to have a hole in it?

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pfel

I admire Vince immensely, he is a breath of fresh air for a politician. He speaks a lot of sense considering the murky arena he has to work within and the skulduggery of financial institutions.
For too long now, some industries have become too powerful where they know that they can get away with outrageous things, knowing politicians are too scared to act. He is right about banks and he is right about the Murdoch empire.

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Grabbler

Forgive my typo’s (corrupt has two ‘r’s of course) and the use of the word ‘blackmail’ , when I meant to type ‘brainwash’ !

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Tony Jones

Dear Mr Cable
You are on a hiding to nothing here. The banks are international global institutions that have acquired so much power they are able to totally ignore national regulations. And if any government gives them too much hassle they simply threaten to up sticks to another country – which is usually enough to force capitulation.

These people are truly the greedy, immoral masters of the earth – if not the universe – and in the absence of a global government there is nothing anyone can do to control or influence them. Only fear of popular action will lead to a change of behavior. But the British are so apathetic servile that even those such as Fred Goodwin are able to go about their everyday lives openly and in complete confidence. Which is hasn’t been found at the bottom of the Clyde wearing concrete welllies – which is what he deserves.

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Michael Lander

The original objective of having a bank account was that it was a more secure place to put any money that you did not have immediate need of in a safer place than your own property. The secondary objective was for the value of the money in your account did not depreciate whilst it was in the hands of the bankers. To achieve this bankers lent money to aspiring businesses with sound prospects of making a profit and hence a return for the bank. The system worked because most banks were run by people with whose propiety and honesty was accepted by the community. Now that banks are so large this link with the customer has been lost and in the rush to make large profits fast the discipline of investing in sound, relatively low risk ventures in a trusting society has been usurped by investment bankers gambling on high risk ‘investments’ hoping to boost their already inflated rewards without regard to the true odds on success. The practice of selling debts from one investor to another is an abhorrent way of defrauding us and a method of passing on their errors of judgement to another mug. This practice alone demonstrates the corruption of the system.

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Giles Cattermole

Following the banking crisis of 1929, the US passed the 1933 Glass-Steagall Act, separating investment from retail banking .

There were no banking crises over the following 70 years.

In 1999, thinking the danger was passed, the US repealed Glass-Steagall. Within 8 years, the Lehman Brothers bankruptcy triggered the banking crisis we are now clearing up.

Point taken?

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dyfnwal

Excellent idea.

Retail banking should be separated from investment banking particularly when the latter are grossly irresponsible in loaning exorbitant sums of money to those who are not likely to repay the loans.

If individual banks disagree, then depositors should consider moving their deposits to another bank such as the Co-operative Bank (to date, I have never used the Co-op). The prospect of such action might just cause a run on the bank concerned, change the minds of its directors and shake the rest of the banking sector. If the major newspapers’s financial journalists were to support such moves, it might be possible to bring our banks back form the precipice.

If separation of the retail and investment banking sectors leads to bank charges for personal accounts – so be it. This will be far cheaper than the current situation where governments have unerpinned banking to the tune of Billions of pounds of our money.

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Denis Fairmaner

Giles (above) makes a very telling point. I am deeply sceptical about the firewall approach, which seems illogical. Either the firewall will provide effctive separation, in which case there is no logic in keeping the two parts in the same company or it is not effective which is the main reason for keeping the two types of banking in one organisation. Judging from the markets’ reaction to Vicker’s interim report, the conclusion is that the banks will find a way of by-passing the firewall, just as they have around all the existing regulatuions.

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allanisniceok

we will lose whatever happens with the banks there greed is universal
they will increase charges like they have been doing since the crisis altho vince and others condem the banks they are still afraid to go to war on them, money talks the old saying and it still does yes vince and others hve a go at the banks but words not action
the banks are still s******* us while the politicians look on afraid to take on the might of the banks let them go to other countries blackmail does not go doen well with the british public

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Emm

Grabbler and Tony Jones make excellent points. This exercise in ‘listening’ is mostly useless – it will result in something like putting a partial fence around a chicken coop to stop the foxes from running off with all the chickens.
The problem is that it used to be that “whoever you vote for, you always get a politician”. Now, whoever you vote for, you get the politicians’ masters – the financiers. Politicians are mostly cowardly nonentities, scrambling to do whatever will advance the cause of the already obscenely privileged minority. Worshipping ‘the markets’, embracing and not taxing foreign billionnaire kleptocrats, conniving with the Murdochs of this world, etc., etc.
Vince Cable and his worthies are going nowhere, because even if they have the will, they don’t have the power. It will take much bigger and better men and women than them to make any real difference. So from my perspective, his is a largely cosmetic and hence pointless exercise.

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Bill

The Americans had the same problem in 1929 with the Wall Street Crash.In 1933 they brough in the Glass- Steagall act designed to control speculation, this seperated the investment banks from the depository banks. This act was repealed in the 1999 by the Gramm-Leach-Bliley act removed the seperation that previously existed between Wall Street Investment Bank and the Depository Banks this allowed banks to gamble with their depositors money.
The banking industry had been seeking to repeal the act since at least the 1980s ( I wonder why ). Bill Clinton signed into law in Nov 1999 the Gramm- Leach-Bliley act. It’s taken 8 years of gambling with depositors saving / money for the banking crises to erupt in 2007/8.
If you want to stop another banking crises threatening depositors savings and having to be bailed out again with are tax payers money SEPERATE OUT NOW THE INVESTMENT BANKS FROM THE SAVING BANKS . We need a Glass Steagall act for this country it worked very well from 1933 untill 1999 when the act was repealed. I very mutch doubt this will happen as the banks have all the power just like the Murdoch Press.The people / savers dont matter to the the government only on election day when their desperate for your vote

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Daniel

For too long we have listened to all the reasons why it should stay as is and where has it got us? Absolutely – in one mess after another! Would you allow your neighbour to gamble with YOUR money? Time to dictate to the dictators. Issue the insruction – and – tell them they can no longer rely on our genorosity. We re not a charity.

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Tony

We should split retail banks from the investment banks for the reasons given already. Why should the profits from banks be privatised leaving the vast losses from gambling by the investment banks to be picked up by the taxpayers?

Also mentioned was that the mutual’s provide an alternative to the major banks. However it’s a real pain when it comes to switching you account to another bank as I have found from recent experience of moving between banks so this option is not as effective as it could be. What we need is for customers to have a bank customer number rather like a mobile phone number which identifies us individually. This customer number would be linked by the banks to our bank account. If we wanted to move to another bank all we would have to do is to tell the new bank what our individual customer number was and it would arrange for all the credits and debits associated with our unique customer number to be forwarded to the new account. This would make moving between banks much easier and with this approach in place there would be more competition between the banks which would be better for the customer.

While personal customers find it a pain to move between banks it must be an even bigger problem for businesses. If businesses also had an individual customer number in the same way ar personal customers it would make it easier for them to move further stimulation competition between the banks.

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Grabbler

Tony, I have a problem with your suggestion. To my mind it gives all the banks too much information about us. I have managed my family’s financial affairs over the last 20 years by holding more than one bank account at a time. To begin with opening an account with a different bank in which to pay our self-employed income and pass over set sums each month to the original bank that held the loan which they were threatening to foreclose on. It meant they didn’t have access to all our money. As things improved we were able to build strong relations with both banks. When we subsequently went into employment we opened accounts at two new banks into which we paid our separate salaries. That gave us four different banks to deal with and ‘rob Peter to pay Paul’. It has so far worked for us as we pay charges at only one of them and never need to run up an overdraft. If we just had one account number that followed us from bank to bank it would reduce that flexibility considerably.
The rich and powerful pay enormous fees to advisors to minimise their taxes and maximise their profits. We simple folk have to just be as ingenious as we can to prevent being ground down. We make our own insurance in our own ways with what is available. I don’t think your idea would help us much.

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John Gifford

I believe there should be a ring-fencing with rules making it abundantly clear that there is no contamination with the investment banking environment – it must be totally financially based as standalone. Regarding costs for banking to the customer, then these banks will be competing with the likes of the buiding societies. I’m with Nationwide for my current account, which does not charge me for the day to day running of my account nor any annual/monthly fee for my debit & credit card.
Also let’s learn from Sweden in the 1990′s and when the banks are re-privatised that the Government of the day sells the stock at a price that will fully compensate for the total cost of nationalisation of these banks and not at a “give away” price.

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Dag Smith

We look to Government to control the excesses and greed of the banks. If the Government seems powerless – as they appear to be in respect of bonuses – Government must understand that tghis is yet another example of disenchantment, made manifest by either fewer people exercising their vote at elections or, in a more positive, but ultimately destructive way by protesting and possibly rioting as the full impact of the cuts affect household spending power. That, together with the apparent unbridled increases in utility bills forcing more people – particularly the elderly – into fuel poverty will set the stage for confrontation with whichever party or coalition is in power. The public are aware that without the taxes paid into the Treasury by the financial sector and the utilty companies the UK would be in a poorer state, there comes a point where fairness becomes a priority rather than self interest. Have courage and be honest with the public. Ask the public to accept a reduction in living standards for a specific period in return for the banks being a great deal more regulated and utility bill increases being capped at 1 or 2%.
Regards
Dag

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Grabbler

Dag, this is surely what the present regime claims to be doing, being honest with the public in the interests of fairness and asking us all to accept huge cuts; to Education, the NHS, Charities, Local Government, Benefits etc. It is a fake – a smokescreen for a privatisation programme such as we have never seen in Britain before. The facts are, we are NOT ‘all in this together’. The powerful intend to keep their wealth and power and make the poor, who actually make up over 40% of our population, pay the bill. People don’t appear to see that those countries with the most powerful capitalists have the largest numbers of poor people. The US is an example and one which the current power elite in Britain wish to emulate. Maximum privatisation, minimum welfare state, constant pool of poor, depressed and unemployed to keep down wages and maximise profits for the rich. The only way we can develop a healthy economy that benefits the majority in this country is to reject the ideology of the Tories and the right wing; to demand a more equal Britain; to make the rich pay their taxes; to forbid the holding of vast amounts of power in the hands of few in the media, in the banks, in the corporations. We need to diversify, we need to encourage public employment that sets a benchmark for working and living standards with good wages and pensions. We need to give maximum encouragement to those private enterprises that are working for the good of the country and it’s future; develop the ‘Green’ economy, invest in production and export of green technologies. And much, much more.

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Grabbler

In the context of the corrupt political and economic system under which we are living, Vince Cable stands out as an honourable man. What he proposes might be viewed as sticking plaster but sometimes that is what is needed to heal wounds and prevent further infection. Unfortunately, we have not yet found a viable alternative to Capitalism and when, unlike in present circumstances, it does not operate to excess, it seems to be able to offer large sections of the population the opportunity for sustenance and development, which are necessary precursors to happiness. The best we can hope for is regulation to control the greed and excesses of the powerful and measures to limit the power elite. In these circumstances Vince Cable should be supported and encouraged to go further along the lines of those instituted in the US after the 1929 crash.

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B.Martin

I agree with Giles, the investment and retail sides of all banks should be ring fenced so that whatever happens to the investment side does not impact on the retail side. Further the investment side should be required to subsidise the retail side when necessary so that there are no bank charges on normal current accounts provided they are in permenent credit by say £500 or £1000 per year.Credit and debit cards all have agreed credit limits and should be rejected at point of use once the limit is reached, until the overspend is reduced to below the limit.
Regarding the banks and other financial businesses their boards of directors should have been arrested for fraud, imprisoned and their assets seized; as it is they have all been rewarded with huge wages etc. and continue to run the businesses. In no other sphere do failures go unpunished.

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ijohn

The Key Tests overlook customer psychology:
Imagine Midwest has two ring-fenced divisions, Midwest Casino and Midwest Retail. When Casino starts loosing money or stops paying a dividend then I would expect Northern Rock style panic withdrawals by the customers of Retail. Especially where life savings are involved, customers will not trust any assurances from politicians, economists or accountants.

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B. Martin

John may well have a point regarding public reaction but it is no reason not to introduce ring fencing. Nor for not holding directors personally liable for the failure of their business.

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Dev

Mr. Cable is fundamentally wrong when he speaks of casino banking in the UK. The risk capital required to support casino banking and hence the cost of this make it insignificantly profitable during normal times and adverse during times of stress. Casino banking did not cause the financial crisis, it was the over-extension of credit, especially to with poor credit profiles.

The Glass-Steagal Act was repealed because it did not work well. In the US, the investment banks adopted a holding company or partnership structure that totally negated the functioning of the Glass-Steagal Act. However, it was more the failure of the US to adopt the same risk and accounting rules that the rest of banking world were using that promoted their system to be viable for “casino banking”.

Mr. Cable idea of ring-fencing will, as someone else mentioned, result in charges for current accounts and even lower rates for deposits because the synergies of cross-fertilisation with the investment side. This is because deposits and current accounts act to lower the banks cost of capital in aggregate and this benefit is passed back onto the account holders in terms of free banking. In addition, this also allows more lending, especially to SMEs and at a rate lower than if this element was not there.

Addressing the comments in the article

1. Banks should be allowed to fail without bringing the whole system down.

Yes – but to do this the clearing system should be taken away from banks. Both RBS and HBOS were clearing banks. If this clearing system failed, transactions could not be made and monies cannot be paid or received. Further, full deposit insurance should be inserted, as in the US. This takes awy moral hazard for banks and motivates them to put in strong avoidance and mitigation processes. The cost of this insurance should be borne by the banks and strong avoidance and mitigation process and sound regulator monitoring, for which the FSA has admitted failure, shoudl lower insurance costs. It will also offer an additional check by the insurers with that of the regulators. If the insurance charges start to increase, this could indicate a signal of increasing risk to banking activities. Northern Rock was not a clearer but the lack of government support for depositors and savers in the past as with BCCI, eroded credibility and government stepped in to try and restore cerdibility but this was too late.

2. Banks make it easier for consumers to vote with their feet by making it easier for them to switch bank accounts.

Indeed – but severe regulations and unnecessary red tape laid in by successive governments make it difficult for banks to change their system in accepting new accounts. this has to be addressed.

3. New banks should be welcomed, to challenge the market domination of the ‘big five’.
Yes, but the big five exist in the current format because of synergy within their activities internationally and economies of scale. Standard Chartered is a successful bank but has decided the its UK customer base is insufficiently efficient when compared with its Eastern potential. There have been smaller banks but they have been less known and less atractive because of the number, scope and costs (or lower returns) of their product. The statement does not include building socities and credit unions which operate under a different system, parameters and regulations.

4. New regulators – the Financial Conduct Authority – should be given the powers and tools to do its job effectively, such as the power to assess hidden charges.
Certainly, I think this has been done under the re-structuring of the FSA??

5. Competition in the banking industry should be assessed. Yes, but this should be done by an ad-hoc committee periodically (say once in 5years) without a quango being formed, not only for cost-benefit purposes but also that competition issues will not be discernable in short periods.

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R Sanderson

Agreed in the main

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Dev

One more,

Most importantly, all members of governance and senior management in banks must be in a position to understand sophisticated risk and economics and appreciate the mathematics being applied in modern banking which are being presented to them and issue challenge to technical incumbents.

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Mel

Ring fencing the retail banking sectors of banks is the very least that should be done. I would prefer the complete separation of the two sectors. It is quite wrong that the taxpayers should end up insuring investment banks against their risky activities. Investment banks should be in danger of bankruptcy caused by their risky activities.

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Stach Odrowaz

One of the problems which caused the financial crisis is total lack of bank regulation by governments. Free market economy is all very well but not as a free for all. There must be limits.
I predicted the 2007-2009 recession as early as 1999 based on consumer statistics. I did not anticipate disastrous decisions by Alan Greenspan, irresponsible lending by banks, aided and abetted by thoughtless banking systems. We all could have prepared ourselves for the recession, having much advanced warning, and the present crisis could have been avoided. There is no such thing as eternal growth, borrowing must be limited to what one can repay in a reasonable period, if governments decide to provide benefits, they must have income to match, i.e.higher taxation. With higher taxation one needs tight legislation to avoid tax evasion. It is possible to achieve a balance, but it must be carefully worked out.
One of the greatest mistakes of our time was bailing out the banks. They should have been left to stew in their own juice, government (or taxpayers) money used to indemnify non-corporate depositors and to form a state run bank to provide finance where necessary.
Be it as it may, all is water under the bridge, we must divide banks into BANKS, i.e retail banks, taking deposits and lending money against well checked business plans or securities.
Banks must not be allowed to trade, specially not in dubious financial instruments.
There is no reason why banking groups should not own financial trading houses, but all assets must be kept separate, with interlending forbidden.

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Hugh

When I left school there was no such thing as “Investment banks”. The banks took your money in savings and wages and made interest on it by re-investing it in low risk investments. They gave you interest on your money which was less than the interest that they made. The difference supplied them with money to loan out to us, their customers, and the rest was profit. One type of loan was a mortgage. This was based on the cost of the home you wanted to buy. It was for a maximum of twice your saly or 2.5 times the combined salaries in the house. Their profit was in millions £s. We were happy, they were happy, their shareholders were happy.
Then greed crept in. The shareholdres (mainly big investment companies, not you or I) demanded bigger profits. Different ways had to be found to make more money. So “Investment Banks” were born which invested in riskier investments. As profits rose, so the investment bankers demanded more money (bonuses) based on what they made investing our money – not the bank’s money, OUR money. But that wans’t enough. So they started getting loans from other banks and quickly re-invested it elsewhere at higher rates of interest. As the porfits grew so the investment bankers built their “bonuses” into their employment contract so that they received huge bonuses irespective on whether they made money for the banks or not. Then we got involved by asking for bigger mortagages based on a theoretical value of the home. Not for re-investing in your home by building an extension but so you could take the money and go to the Caribbean for a month. The greed factor had reached the man in the street.
My answer? Go back 50 years. Have domestic banks that work as they used to and have entirely separate banks gambling with other people’s money. And if that means that mortgages are harder to come by with higher deposit percentages and only an increase if you can prove it is for repairs or improvements to that house, so be it. If it means that bankers only eran the same as teacher or a doctor, so be it. If it means that a whole industry of gamblers have nothing to do, so be it.

Lets take the Greed out of Britain.

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Eoghan

The main obstacle to splitting retail and investment banking is that it would deprive the directors of the retail banking side access to the vast pool of casino profits made (in non catastrophic years) on the investment banking side. Do turkeys vote for christmas?

The weakness of ringfencing is that the risk appetite of a director of a retail bank must be completely different from that of an investment bank. For ringfencing to work, the directors of the retail side must also want it to work and not constantly seek ways to frustrate the regulations. Thus ringfencing will not work in practice, whatever the theory might suggest.

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R Sanderson

Agreed

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Paul Rouse

I despair that the Non Executive Directors of the Banks have been allowed to avoid any responsibility for the banking crisis. Their job, for which they are extreemly well remunerated, is to ensure that the management act in a fit and proper way, and to protect the interests of the shareholders.
It may, of course, have something to do with the number of senior politicians who fill NED positions in the Clty when they leave office.

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R Sanderson

Cble is just like a dog with a bone.
Give it a rest, it’s a stupid idea to break up the top banks just to satisfy a whim!

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trustyt

While your bank bashing Vince how about sorting out the near criminal way the banks deliberately pillage the interest rates on ISAS – can’t you tell them they must offer at least a step up from their other offerings. Never have we been so short changed and at the same time we’re watching the international value of the pound destroyed relentlessly. As government policy crushes the value of the pound and all our mass of imports continue to rise perhaps you will get boris to twin London with Rome and Athens because it’s sure going to feel like were all in it together. We got into this mess with lending easy money and what have we done? Well we’ve dropped interest rates to nothing and caused inflation to rocket. The only people to benefit are those who borrowed too much in the first place. I expect more money from thin air any time soon. Should we all print our own to save the distribution costs?

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sudhir

In the 3rd episode of ‘Made In Britain’ series by Evan Davis of BBC, I was shocked to learn that all the banks are subsidised by the state in this country. But when state subsidies industries, they shout on the roof top. Because the state has guaranteed to cover every lending made by the banks, the banks could lend cheaply and make huge profit. When asked what will happen if the state withdraws the guarantee? They will make less profit. If they make less profit, there will be less bonuses.
We have been threatened by the City that if state interferes, banks will take their HQ elsewhere. In every country the financial institutions threaten their govt. The govt. should call the bluff.
First the govt. should withdraw the guarantee, then ratio of liquid capital to lending be increased, split the banking and investment part of the banks. This will result in charges to current accounts, but it will be lower than we estimate because every bank has to compete.
Govt. should extend Post Office as banking institution like National Giro. The money with Post office will be safe, and the govt. could use to invest in capital projects,which in turn will create jobs.
The govt. should not be scared of banks, as they did of Rupert Murdoch. Stand up to a bully.

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Dev

I did see that “Made in Britain” programme. The only drawback I found was that Mr. Davis did not elaborate how the banks were subsidised during the pre-credit crunch era. I had hoped that he would give more insight into how much and what manner this happened.

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Dev

“Retail banking should be separated from investment banking particularly when the latter are grossly irresponsible in loaning exorbitant sums of money to those who are not likely to repay the loans.”

In the UK, the retail banks made those loans.

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Eddie

I work in the volutary sector as a financial advisor. The banks need to be regulated much more than at present. In the course of my work I have had many a run-in with them. Their business practises are abhorant. Thier staff try to bamboozle the average person with so much jargon. I have reported a number of them to the financial regulators, and won for my clients. I have not trusted any banks for years,[ individual staff can be good indeed,] but there is an inbuilt culture of greed is good mentality. The government should give more power to the Credit Unions to allow them to compete. Yes ring-fence them, and if they fail, too bad. Their threats to go abroad, let them, who would want them ruining another economy?, but take back every last penny ever given to them, with interest.
Call their bluff, Vince Cable. I don’t gamble with my money, don’t let the banks gamble withit either.

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Adam

I agree wholly with the first half – not sure what the relevance is of the second half!

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Trust not

I thought love made the world go round????????????????????????

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Gordon

Every year hundreds of millions of pounds are extended on unsecured terms in trade credit and this is managed by Credit Controllers who may well work to well established principles of credit risk assessment; thus credit risk is controlled but not eliminated. One of the first rules is that you do not trade with a crook on the assumption that you can prevent him from swindling you. The other assumption is that the crook is not sitting next to you.
Competent and effective risk assessment played little or no part in the recent banking crisis; the prime motivation was unadulterated greed and self interest via the bonus system.
Would it be possible to remove the risk assessment process away from bankers and place the fixing of credit limits in the hands of independent and non-bonus motivated professionals and to deduct all bad debts over and above the independently established credit limits off the bonus pool. In this way our greed motivated & incompetent bankers would be the authors of their own personal losses. Let us also not forget that equally incompetent politicians recommended the worlds worst banker for a knighthood for ‘services to bankers’. Something radical has to be done.

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Brian Sherrad

Use NS&I funds to do what the banks have failed to do in spite of promises, lend to small businesses. The competition would soon wake them up, much more than promises they make but know will not be kept.

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Philip Twydell

The problem lies in the climate of self-regulation that has existed in the UK since the 1980s. If we ever needed proof that allowing individuals/organisations/industries to regulate themselves leads to abuse on a massive scale we only need to look at the medical & the legal professions, the newspaper & banking industries, and a whole host of other semi-regulated organisations. All are absolutely riddled with abusive & corrupt practices. None should ever have been allowed to escape proper independent scrutiny. The trouble was of course that the Thatcher Goverment was as much in the pocket of Murdoch & his cronies as every government since that time and we have been living with the consequences ever since.

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