/ 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.