/ Money

Will the Chancellor restore your confidence in the banks?

Mansion House

Every year the Chancellor delivers his Mansion House speech – the topic, the state of the British economy. It might sound heavy but bear with me as this year’s could offer some light relief from our financial worries.

Today’s Banking Reform White Paper outlined plans to ring-fence retail banking and improve protection for your savings. What does it mean for us?

We might think that these technical proposals have a limited benefit for our day-to-day banking but, irresponsible risk-taking meant that the government bailed-out the banks to the tune of £2,000 for each man, woman and child in the UK.

Just think, the interest bill alone on this bail-out is £5 billion a year – if we weren’t paying this then we could afford to cut over 11p off a litre of petrol and diesel.

The ring-fencing of retail banking services will help protect the banks from instability. Rather than banks keeping all their cash in one pile, the money we share with the banks – in our current accounts, depositing cheques etc – should be separated from their risky investment banking arms.

Increased banking costs?

No doubt, we will hear scaremongering that the reforms will increase costs for us as bank customers. But this is simply not true.

The UK retail banks were profitable throughout the financial crisis and the services which we use on a day-to-day basis will be provided within the ring-fence.

The full proposals will not be implemented until 2019 so it will be some time before we see the benefits. In the meantime it’s important we do not allow the vested interests in the banking sector to delay the proposed reforms.

New banks to shake up the big banks

It is important that steps are taken to break the dominant position of the largest high-street banks and ensure they compete for our custom by offering better service and value. We’re already seeing M&S hitting the high street (although they will still be part of a larger banking group – HSBC) but we need more new entrants.

Protection for savers’ deposits will also be increased – meaning that you will be at the front rather than at the back of queue to get your money back if a bank goes bust. We want the Chancellor to deliver a simple and clear deposit protection scheme with a limit of £85,000 for each banking brand. You shouldn’t need to investigate the corporate structure of your bank to find out if your money is protected.

Do the Chancellor’s plans offer you some hope or are you doubtful they’ll make a difference? Will you feel happier that your money is safe in the knowledge that it has been separated from the money they choose to risk in investment banking?

Comments
Member

The simple answer is NO. As by 2019 chances are me like many others will have none of our money left anyway. That’s even assuming you’ve got any money now.

And all QE seems to be doing is giving money to the banks (and reducing the value of everyone’s pensions now) and not really helping the person on the street.

Seems the chancellor and the BoE aren’t really trying to help the person on street at all.

Member

So in this white paper is there anything to stop banks from dropping the interest rates on savings products to almost zero and bringing out a new product and not warning customers on the old product or transferring them automatically to the new product. Something useful to stem the tactics used by banks to try and rip their customers off with. (sounds better than with which etc ..)

Member

Do you think that reducing my income to 10% of what it was before the Banks engineered “credit crunch” would actually >b>restore my confidence in the Banks??????? The Chancellor is as inept as the rest of this totally inept “U Turn” so called “government” – It is simply a rich man’s club.

Member
Anna says:
15 June 2012

No. This is the first time I voted for the Tories and every single day I ask myself what possessed me! I do not trust them and I too believe that they do not care for the ordinary person, in fact, the most vulnerable are even more so in their hands. It is high time that the Banks valued their customers and put them first, the interest rates they offer us are quite pitiable, compared with the profits they keep for themselves. They should not gamble with our money and then expect the government to rescue them. It goes without saying that our money ought to be protected.

Member
Thomas says:
16 June 2012

I understand that already the banks are successfully diluting the intended ring fence intentions. I have no confidence this Chancellor will legislate in the interests of the consumer. This government identify with the banks and other vested interests, not those of the public as a whole. This is exemplified by their handling of the News International/BSkyB affair – among others.

Member

Ring-fencing will not restore confidence. It ignores herd behaviour and the distrust of politicians. If Midwest Investment Bank is reported as being in difficulties then the customers of Midwest Retail Bank will withdraw their funds in a Northern Rock style collapse. Customers will not believe assurances from politicians, bankers, journalists or academics. Only splitting the banks to create separate legal entities for the investment and retail activities will be acceptable. This is easily achieved with a 2 for 1 share issue.

Member
FINSBURYPARKER says:
23 June 2012

‘Will the Chancellor restore your confidence in the banks’?

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Nearly got caught out on this one, its a no brainer wind up!

Member
Daveg says:
28 June 2012

I would like to know where the billions given to banks by the Bank of England has gone.A few million of this could be used to help NHS hospitals and might even help the Coalition as the majority except for the Tories who can afford private care,like the NHS.A lot of people could have said years ago that the problems with this financial situation is down to Bankers,even paying bonuses with our money.

Member
FINSBURYPARKER says:
29 June 2012

‘Will the Chancellor restore your confidence in the banks’?
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An academic question, confidence in Banks vanished along with the confidence in Governments years ago!
Unless we go back to a system of ‘Bartering’, we have no choice under the present system.

Governments themselves are incapable of running Banks, in addition, all the ‘Best brains’ are in the private sector, the Civil Service only gets those that could not hack it in the private sector, that’s why the private sector is always one or two steps ahead of Governments.
Coupled with the fact that Government Ministers have vested interests in Banks…..All countries!

A good first step would be to divorce retail banking from speculative (Gambling) banking.

It seems to me that Joe Public has no idea how the World runs, or, they feel like most, they have no say or control over what goes on,…..I rather feel the latter is a more likely answer.

Member
Jenny says:
1 July 2012

I think its amazing that this government has decided to bail out banks with billions of our money, even though they keep disappointing, but are perfectly willing to shut down NHS trusts for not doing well following cuts of billions.
Dramatic increases in fees for students, reduced pensions and benefits stopped for hundreds of thousands of people and tax evasion for billionaires.
If this is healthy competition, Im dead against it. Completely cold-hearted and ruthless.

Member
FINSBURYPARKER says:
1 July 2012

“I think its amazing that this government has decided to bail out banks with billions of our money”.
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In and ideal world with reasonable altruistic governance you are right!

We do not live in the above world, all we can do is strive to make it close to the above, as to whether we will ever come close to the ‘Ideal’, is questionable.

If the banks had been allowed to fail, the consequences of that would have been disastrous, for all of us!
The fact that they had to use Taxpayers money is academic, they had no other recourse.
I don’t like the fact that they had do so, the same as everybody else, but, the reality is, if they had not done so, can you imagine the chaos that would have ensued?

We have, as a Nation, (along with others) have been living beyond our means for decades!
There are so many factors contributing towards the this fact that to try and mention them here would take too long.

Suffice to say, the fiscal system that exists in this and other countries needs a radical overhaul, but, as long as those that Govern us have vested interests in NOT doing so I’m afraid we are stuck with it!

We could take to the streets et-al, but violence just breeds violence as amply demonstrated by other countries that have gone down this road but, as John Adams said,

“Democracy never lasts long. It soon wastes, exhausts and murders itself. There was never a democracy that did not commit suicide”.

John Adams, Letter, April 15, 1814

Regards.

Member
Jenny says:
1 July 2012

Yes – I suppose I could agree it would have been disastrous if they had failed and understand that debts need to be paid. The people at the top earning massive figures at the same time though seems unnecessary wastage.

But I don’t understand why they would allow NHS trusts to fail then, as that would be disastrous too – ‘free’ healthcare being a major selling point as a country.
Not too impressed with the pre-Obama American system, but we are heading for that.

I realise it is slightly off-topic, but the comparison of the two systems confuses me.

Member
FINSBURYPARKER says:
1 July 2012

‘Yes – I suppose I could agree it would have been disastrous if they had failed and understand that debts need to be paid’.
_________________________________

‘Could agree’, more like ‘Definitely agree’!

As to the ‘Top Figures earning ‘Massive’ amounts, I agree it is out of all proportion to the amount of Taxes they contribute.

“We make a living by what we get, but we make a life by what we give”.
Winston Churchill.

NHS as a ‘Major Selling Point’???…..

There is no comparison with our Health system and the American system, thank whatever God you may deem appropriate.

Regards.

Member
Jenny says:
1 July 2012

I do believe there is a strong comparison between healthcare systems – its just a matter of time.
Competition means privatisation (over time) in this case and I am afraid that would lead to commercialisation (as in America).

The NHS is there to provide free care at the point of delivery, what is needed and aiming towards cost-effective via guidelines such as NICE. The government cuts (£20 billion ‘efficiency savings’ (service cuts) over the next 3 years) would likely result in many hospitals closing. This was pushed through without anyone seeing the risk vs benefit data (kept secret by the government, therefore suspicious). Also the secretary of state is no longer responsible for health – its all on the GP commissioners – the government has stepped out of responsibility. It wouldn’t be dangerous if the money was to keep coming, but this is clearly preparation for privatisation.

As hospitals disappear, patients travel further. Staff lose jobs and want to work in the private sector, which starts up in convenient locations. People’s respect and trust for staff goes down, as they feel they are out to make money rather than provide the best care. Healthcare professionals who do well will be the business-minded ones, who aren’t necessarily providing necessary care, but are trying to sell excess tests/procedures. The NHS will probably still exist, but there will be a lower standard of care than now, by stealth. There will be a two tier system used by a sizeable minority, rather than the small number who currently use private healthcare.
I’m worried the NHS will also be exploited for money by private providers to the NHS, who will not be regulated in the same way.

I think that the Health and Social care bill creates a situation where private providers can appear to be providing a service, but due to market forces, only measurable standards will be maintained and healthcare outcome standards are notoriously difficult to measure.

Why is that less important to prevent than the banking failure (which would be a disaster)?

It is a moral hazard to bail out the banks where they are already private and the issues are simpler – if they take a risk and it fails, they have to be punished for this. Whether the punishment is that the institution actually fails (reduces consumer confidence) or that they are nationalised (investors are compensated, the government owns shares) and the responsible individuals are punished personally, would be a judgement issue. When the banks are bailed out though, the government doesn’t seem to be enacting any control over them and thats where I think the problem lies.

I think it is the government’s responsibility to manage any sector which the private sector can not manage efficiently, which is why them stepping out of healthcare responsibility is bad, but stepping into banking responsibility but not enforcing performance is also bad.

Member
FINSBURYPARKER says:
1 July 2012

‘Why is that less important to prevent than the banking failure (which would be a disaster)’?
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Where did you get that from???………….Not from my last post!

Unless that is a question for all on here?

Member
Jenny says:
1 July 2012

Yes, I suppose it is a question for everyone.
I wasn’t particularly disagreeing with you on the banking issue – just putting my point up on that and comparing it to the healthcare reforms.
I was just replying to your comment:
‘ There is no comparison with our Health system and the American system, thank whatever God you may deem appropriate.’
to say there was a strong comparison.

Member
FINSBURYPARKER says:
1 July 2012

‘To say there was a strong comparison’!

Not at the moment , but, in the future??………Who knows!

Member

I think my answer to the question must be No – things will just get worse. I’m 70 in August & say overall the tone & tenor of society in the UK simply goes down & down as every year passes. Life is much more unpleasant now, despite my good financial state having worked hard all my life. The UK like most other countries is run by crooks who are just interested in lining their own pockets. ‘Twas ever thus…..get used to it….things will get worse. Don’t vote for them – it just encourages them. Politics is rotten to the core as it banking system – they feed off each other.

Member
FINSBURYPARKER says:
1 July 2012

“I think my answer to the question must be No – things will just get worse. I’m 70 in August & say overall the tone & tenor of society in the UK simply goes down & down as every year passes. Life is much more unpleasant now, despite my good financial state having worked hard all my life”
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We are of a like mind Terry, I was 70 last November, I endorse every word of your post.

“We make a living by what we get, but we make a life by what we give”.

Winston Churchill.

I think that ideology of Winston has long gone.

I think a line in one of his other speeches applies here ” A new Dark Age made more sinister, and perhaps more protracted, by the lights of perverted science…..Computers?….Surveillance Cameras?…. Corrupt Governments?….Bankers?

Regards.

Member
Jenny says:
1 July 2012

That was in opposition to the N***s though!
I am younger (29) and possibly more hopeful that I or someone can change things. I think the downfall I am worried about will happen sooner than the government are letting on and it already is my future and probably yours. I will vote, in the hope that someone with more integrity will be in charge and reverse decisions, rather than just carry on with the changes made and adding to them.
It is like walking through treacle to resolve these issues though, especially if you are rather further down the food chain (currently) and being affected by the changes already – I will probably not be able to retire before I am 70 because of these choices.
I think that the majority of people looking to become politicians start in politics for the right reasons, but if you are looking for that kind of power, maybe you are not the right person to have it. I think their attitudes are wrong.

Member
FINSBURYPARKER says:
1 July 2012

‘That was in opposition to the N**** though’!
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Make no mistake, whilst Adolph and his henchmen are no more, the philosophy is still very much alive and kicking in Europe, in certain sections of the population!

So, in essence, Winston’s ‘Dark Age’ is still very much relevant today, and for the foreseeable future!

Eternal vigilance is the price me must pay to ensure that it never happens again.

Fascism has many faces (An Oxymoron?) just different labels.

Regards.

Member

I think someone needs to look at the targets these people are being asked to achieve. I know when I had a job before redundancy in the software supplier to the finance industry, my targets were a joke and never took into account the day-2-day work I was actually doing, they were always in addition it. So if people work at just achieving targets and not the “real” work, bad things are likely to happen. In my case they didn’t like me pointing this out so my day-2-days tasks became targets as well, basically meaning I wasn’t able to achieve them all. Enough to cause someone to have a breakdown, oh wait, it did 🙁

Member
Jenny says:
1 July 2012

I would agree with that, William. Unreasonable targets reduce production.

Member

Politics is like religion…it’s design & purpose is to control others. Banking comes into this category.
There are control freaks in abundance in society & they just choose how to do it via these 3 insidious
venues. Don’t trust any of them – they’re all crooks.
Having said that there are decent people around that are not involved in any of the above as I know a few.

Member
FINSBURYPARKER says:
1 July 2012

“Politics is like religion…it’s design & purpose is to control others. Banking comes into this category.
There are control freaks in abundance in society & they just choose how to do it via these 3 insidious venues. Don’t trust any of them – they’re all crooks.
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The more the fruits of knowledge become accessible to men, the more widespread is the decline of religious belief.

Sigmund Freud, The Future of an Illusion (1927

Regards.

Member

Mmm but my knowledge comes from the school of experience 😉 I have a Phd in it!

Member
FINSBURYPARKER says:
1 July 2012

‘Mmm but my knowledge comes from the school of experience 😉 I have a Phd in it’!
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That’s two of us Terry!

As for academic qualifications, as one notorious Entrepreneur once said:- Hmm!!…Your CV looks good on paper!….But,…Then again,….So does fish and chips!

Regards.

Member
Jenny says:
1 July 2012

What are the exams like in the school of experience 😉 I went once, but the library facilities were inferior 🙂

Religion is morally neutral in itself, but can be used to control others. Politics is a means of organising or manipulating others, which you could call control. Banking however is just a means of making money.
Given that the government owns large portions of the banking sector now, it would be ideal if they managed it better so that the banks performed more successfully and brought the money that we have invested back to us! If the banks are profitable as it says above, then why do we need to invest more?

I think it would be really hard to tell the difference between investment and retail banking (apart from the extremes), so Im not convinced the ‘ringfencing’ will make a difference. However, I have no qualifications in economics to be sure on that. 😉

Member
FINSBURYPARKER says:
1 July 2012

‘What are the exams like in the school of experience 😉 I went once, but the library facilities were inferior :-)’
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29 years??…….

Well, all I can say is, you can lead a horse to water, but you cannot make it drink! 🙂

Regards.

Member

The only way ring-fencing will work is if the investment and retails arms of a bank are made completely separate legal entities. As there is little point in just making the investment arms gamble with their own money and not the money of you or I which is held in the retail part if the investment gambles, I mean deals, nope I mean gambles, I was right, goes bust and drags the retail arm down with it.

Member
Jenny says:
1 July 2012

Are you calling me a horse? 😉 I think Ive used my 29 years quite well, but I know 70 year olds who have as much common sense as they did at 12!

Member
FINSBURYPARKER says:
1 July 2012

“Are you calling me a horse”?
______________________________

????……….Only the guilty flee where none pursue Jenny!…But,..I guess my analogy was wasted
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‘But I know 70 year olds who have as much common sense as they did at 12!

I know 29 year olds who have never had a job in their entire existence, but I know plenty of 70 year olds who have never been unemployed!

It seems the old adage, ‘Youth is wasted on the young’ just might be right!

Mind you,…29 isn’t exactly youthful now,…is it?

Regards.

Member

“Religion is morally neutral in itself, but can be used to control others” ….not can be, Jenny, it IS used to control others just like politics is used, & this makes it a corrupting influence. Banking used to be a ‘Service’ when I first had a current account but over the last 40 yrs the whole system has become totally corrupt.

I read theology for 4 yrs in the late 60s & early 70s & saw from behind the scenes how hollow it all was….

Member
FINSBURYPARKER says:
1 July 2012

“Banking used to be a ‘Service’ when I first had a current account but over the last 40 yrs the whole system has become totally corrupt”.
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Agreed, I feel guilty these days cashing a cheque, ‘a Service’?…….That disappeared along with our milkman’s service!

Regards.

Member

You mustn’t plaster all 70 yr olds as being senseless at 12. The dodgy people I avoided then are the ones I avoid now….. ‘

Member
Jenny says:
1 July 2012

I didn’t say you were 70 year olds who lacked common sense. Now who is the wicked man fleeing though none pursue! I am a little surprised that someone who regards religion as a control mechanism uses a biblical quote, though. Also, Churchill didn’t completely oppose technology (Churchill College, Cambridge), surveillance or bankers.
If I had misunderstood the analogy, who is the horse and while we are at it, what’s the water? 😉

I think in general, one can’t assume function by age. 29 is young by some measures and not others – young for a Prime Minister, old for a Wimbledon champion. 😉
My parents still get milk from a milkman! 🙂

Member
FINSBURYPARKER says:
1 July 2012

‘My parents still get milk from a milkman’!
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?????….Milk from a milkman’???….Mine comes from a cow,….Unless you mean ‘The Milk Of Human Kindness?….very short supply these days!……..Tried the Soya stuff, too sweet.

Regards.

Member
Jenny says:
1 July 2012

Do you keep cows then? I can see how you got confused 😉 You are right though – we actually milk people.

Member
FINSBURYPARKER says:
1 July 2012

He whom sits on high has fired a warning shot across my bows re: my posts on this subject.
Regards.

Member

As amusing as your exchanges are, they are veering significantly off the topic of banking. To put things back on track, you might be interested to read what our Chief Exec has said about Barclay’s fine and then what consumers think in our survey:

http://www.which.co.uk/news/2012/06/barclays-fine-highlights-corruption-at-heart-of-banking-system-289892/
http://www.which.co.uk/news/2012/07/prosecute-individuals-involved-if-banks-break-the-law-say-consumers-289977/

We hope to have a new Conversation on this tomorrow. Hope to see you there.

Member
FINSBURYPARKER says:
1 July 2012

O.K Patrick, it was just a bit of ‘Froth’!….Man does not live by ‘Banks’ alone,…Serious though the matter is!

Regards.

Member

Some of the money that Barclays have been fined and the money the other will be fined should go towards funding a proper Serious Fraud Office, as I gather they’ve not persuaded misdeeds in the past due to lack of resources and funding.

Member

Do we really think that £290M is any more than a pin-prick c/f to a billions they raked in? It was an insult to all bank customers who will end up paying it. The only thing that might curb bank corruption is putting the guilty parties in prison with long sentences. As politicians & bankers are in each others pockets this will never happen…….I suggest you don’t hold your breath. Bank regulators & regulations are a joke too. The whole system is broken.

Member
FINSBURYPARKER says:
1 July 2012

‘Do we really think that £290M is any more than a pin-prick c/f to a billions they raked in’?
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Exactly Terry!

£290 BILLION would have concentrated their minds!

Regards.

Member
FINSBURYPARKER says:
1 July 2012

As far as ‘Bonuses’ are concerned, that’s the concern of the ‘Shareholders’, provided its a ‘Privately owned Bank!

As long as these ‘Private’ Banks pay out nice large juicy Dividends, the shareholders are hardly likely to bite the hand that feeds them, are they?

A similar situation occurs within the realms of the Union Barons, as long as their member get a nice slice of the action, their members really don’t care if their Top brass get huge Salaries, and live in mansions!

A different kettle of fish exists regarding those Banks where the public has a large investment via their Taxes!

That in turn has its own problems, turn the screws to hard on them, and the people that are capable of turning it around to get in the black again will move to pastures green.

The term ‘Northern Rock & Hard Place’ applies here?

So, I guess a corruption of that old adage, ‘Oh what a tangled web we weave when Banks first practice to deceive’ is apt for the situation we find ourselves in.

How to put things to rights?…..Ahhh,…..There lies ye rub!

‘Give me control of a nations money supply, and I care not who makes it’s laws’!

Amschel Rothchilds

Yup!….That sounds about right!

Member
Jenny says:
1 July 2012

Bonuses should be dependant upon success. If they aren’t, then it should be called pay.

I agree with the survey, in that I feel the government would not act in consumer’s best interests. Already it appears that they have reduced taxes for billionaires but increased it for others. Being equal in percentage terms across the board, even if it meant cuts for all, would have been better.
I think that these would cast doubt on the government acting in the ‘average’ citizen’s best interests.

I agree also with previous posters’ views that the fine is too low and that it should be for individuals, not the bank. Fining the bank just results in taxpayers footing the bill, so individuals need to lose out.

Member

Any fine that is levied against a bank should also see the entire board of directors banned from sitting as a director in any company. Only once the punishment is seen as being harsh enough will the individuals who let this sort of thing happen either through their actions or lack there of will they start to improve. And maybe fine each director too. After all, they paid all that money seemingly in good times and bad

Member

I wish any chancellor best of luck or any politician trying to reform the banking system. The problem is in any other walk of life politicians and bankers would be calassed as serial criminals no hopers to reform. They have a nice cosy club going between them.

Member

Hello everyone, we have published a new Conversation you might be interested in: ‘Prosecute bankers when banks break the law’ https://conversation.which.co.uk/money/barclays-libor-scandal-prosecute-bankers/ We’re keen to hear what you think.

Member

Why should bank employees get bonuses? I managed a £ half a million NHS ward budget & was never overspent but I didn’t get thanked for keeping an eye on it…….

Member
Daveg says:
2 July 2012

Can anybody tell me what happens to the money the Bank of England gives the Banks,the total money when the next £55 billion is given will be £385 billion.Where does this money come from,does the B of E just print it.If so print some more for the NHS,the Forces.OAP’s,removing soup kitchens,you could go on forever,so do these messages achieve anything.

Member

@daveg, Its not real money (i.e the stuff you have in your wallet/bank account).

For a detailed explanation of QE see .. http://en.wikipedia.org/wiki/Quantitative_easing

I’ve always thought this QE rubbish is a huge mistake, I would have rather seen the chancellor force HMRC to refund one months tax to all taxpayers. Now that is real money.

Member
Jenny says:
2 July 2012

Very useful information – thank you