Monday, 11 April 2011

Banks - Again!

My message to banks is simple - you are welcome to take your HQ overseas, you are welcome to take your 'top talent' to America and you are welcome to increase your lending charges.
Because these are gesturing and threats that make it look like the banks are unhappy with the proposals put forward today.
The reality is that these proposals will not change the behaviour of the biggest banks and will not prevent a banking collapse again. All that could actually happen is that banks have to keep a little more in cash deposits than they do now i.e. They can't gamble all of our money - just nearly all of it.
Don't forget that these are only proposals, there are another six months of 'lobbying' which is the current acceptable term for bribery before which the Commission gives the report to the government, who then have a further six months to decide what to do with it. It will then take at least another twelve months to get diluted through parliament and the banks will then have a few years to prepare a way of getting around the regulations and we will end up having to sign a few more forms when we go to the bank to say it is ok for them to do what they want with our money.

All in all, if these proposals even get taken up, which I doubt, they will have negligible effect upon the operations of the banking and financial sector.

What we need is to decide what we actually want from our banking sector and then accept that it will mean change. It will mean deciding if we want to be a 'World banking centre', which will mean going back to having no control over the banks at all and exposing the economy and all of our money to international whims. Or we could accept that we do not want that type of money controlling our economy and restrict the actions of banks. If the big banks then decide to leave the country, so be it.
Smaller banks who make a profit through consistent and ethical lending would fill the gaps - it would be a big chance but it would be a change in the right directions.

The Firewall that they now talk about is nothing more than a noble gesture. Banks would find ways around it as there is no real way of enforcing it - it is a simple paper transfer of money back and for to make it look like they are complying. It is only by completely breaking up the integrated financial systems that we will ensure that our money is not put at risk again.

The biggest worry about these proposals is that the strongest measure is to make banks hold 10% of deposits as cash security - sounds great. The Bank of England recommends a minimum 15% held as deposits and when Lehman brothers went bankrupt it held 11% in cash deposits.

Another great opportunity to really deal with the issues that continue to hold this country back is being lost - it does not look like anyone wants to take those opportunities. Until we force them to - they will continue to tread the path most trodden.

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