Monday 17 May 2010

Government retreats from Banking reform

Who has led this? Read this article in the Telegraph. It says that there has been more or less a u-turn on the approach to banking within the first week of Government. In many ways it is a return to a more sensible policy, with reform but without prejudice.

Splitting the Investment and Retail banks, although a good idea, is simply not possible unless it is done on a global level and that was never going to happen.

Poor St. Vince has also seen his role on the banking committee reduced as that forum is no expected to be heavyweight and give and high-powered recommendations.

All in all the banks must be please and their share prices will react this week to this news. My hunch is that there is a good working relationship between ex-Investment banker David Laws and George Osborne - they have quickly decided there are other fish to fry than the banks.


Nick Drew said...

as noted before, the key is to ensure adequate risk capital is allocated to prop trading (they were getting away with blue murder before '07)

let's see how the 'bank levy' pans out - another one for the back-burner ?

James Higham said...

Perhaps they've agreed that Laws knows money and Osborne can use that to make it look as if he does.

Anonymous said...

You could easily split out UK retail banking from the rest, which is all anyone in the UK is concerned about.

Anonymous said...

They've shown some sense.

While both the 5% pay cut for MPs and the attack on banks were populist vote winners with no benefit to the country, the attack on banks would have been extremely harmful.

Banks contribute a great deal to this country, and if the government wants to bash them then they'll just move to a less nasty regime.

Splitting retail banking from the rest is nonsense as well. Northern Rock? Completely retail.

What happened was not the result of anything other than horrifically bad management and risk taking. Shareholders constantly pressing for more returns now, and directors happily getting a bonus this year, and hoping the bubble doesn't pop and they don't get found out.

What doesn't make sense is an attempt to attack the banks as revenge... our banks are a key export trade for the country. The reason why the EU is keen to hammer banks is because we've got a very productive banking sector... and they want it. The Dutch, French, Germans etc etc all laugh up their sleeves when British politicians promise the dim electorate that they'll get revenge on the banks.

One good thing seems to have come from the coalition - populist, political, bad for the country silly policies can be removed from the manifestos.