BBC BLOGS - Peston's Picks
IN ASSOCIATION WITH
« Previous | Main | Next »

Davos: Where the battle for financial reform was lost?

Robert Peston | 10:49 UK time, Monday, 31 January 2011

The eminences at Davos aren't always that brilliant at spotting the next crisis, even when it's under their noses. I was at a meeting on Wednesday at which an intelligence specialist assured us all that Egypt would not turn into an inferno of protest, only hours before the portals of chaos opened.

Davos at night

 

That said, the response to the Egyptian crisis from Davos person - world leaders from government, business and civil society - was fast and coherent: President Mubarak was left in little doubt that he is an isolated figure, who would be spurned by the global elite unless he listens to the voice of his people.

But what about when crises abate, and we're left with the hard choices about how to make the world safe again for a generation? As you'll have guessed, in this instance I am talking about two of my obsessions: how to mend the banking and financial systems; and how to fix the eurozone.

Here, some would argue, Davos shows all the flaws in the world's system of governance for issues of significance for the entire world. Because as the great crash of 2008 has become a hateful memory rather than hard painful reality, and as there are signs of strengthening recovery in the US - still the world's biggest and most important economy - the voice of reform is increasingly drowned out by the voice of those claiming that everything is broadly okay again and time will be the greatest healer.

Two contrasting synopses of where we are: "The boom is back" said one of the world's more powerful bank bosses; "We're beginning to lose the battle for change", said an influential regulator.

Those two statements are connected: the more that some kind of apparent "normality" returns to economic life, the more that politicians fear a return to recession caused by the short-term effects of further measures to strengthen banks (for example).

It's this tension between short term prosperity and long term stability which could bring the reform train to a grinding permanent halt.

In that context, two of my conversations with decision-makers stand out.

First, a senior member of the French government told me that President Sarkozy would oppose any capital surcharge on Globally Significant Financial Institutions, or the mega banks.

The French reject the need to require the largest banks to hold more capital as a protection against potential losses than other banks - even though many central bankers and regulators now accept that the enormous interconnected balance sheets of the mega banks are the San Andreas fault of the financial system and global economy.

Why does the French government oppose any requirement on the biggest banks to hold more capital than the new Basel minimum? Well it's because giant eurozone banks are warning that if they have to increase the ratio of their capital to their loans and investments further than they're already being required to do, the likelihood is that they'll do this by restricting how much they lend - thus snuffing out anaemic eurozone recovery.

And an alternative for eurozone governments of their taxpayers injecting capital into eurozone banks to strengthen them is profoundly unappealing to most governments - especially at a time when some of these governments are struggling to fund and reduce fiscal deficits. That said, if eurozone banks were better capitalised, arguably investors would be less reluctant to finance not only those banks but the states standing behind the banks (though few eurozone ministers quite yet see how intimately connected is the perceived weakness of eurozone banks and the eurozone itself).

So why does opposition to a mega-bank capital surcharge from the government of a medium size economy like France actually matter? Well it's because agreement on a capital surcharge can only be reached if all the G20 countries sign up for it. And that looks highly unlikely, especially with France as current chair of the G20, able to control the agenda and priorities for the world's most powerful decision-making collective.

Now the second conversation that resonated most for me was with the head of one of these globally significant financial institutions. He was musing on the possible implications of any kind of attempt to forcibly separate investment banking from retail banking, either by the explicit break-up of universal banks or a requirement that universal banks (like his) put all their investment banking operations into discrete, separately capitalised subsidiaries.

What he said was that it was all very well for the UK's Independent Banking Commission to muse on the theoretical benefits of such separation of retail and investment banking, but the Commission was not on planet Earth: the interconnection of retail and investment banking is now so intense, thorough and complex that it would be impossible to unscramble.

There are two aspects to this. First, that it would be pointless for the British government to unilaterally mandate such separation, because a bank like his would simply transfer all its international investment banking out of the City of London to operations elsewhere in the world.

Second, and more importantly, such separation would be a legal, logistical and economic nightmare.

How so?

Well, hundreds of billions of dollars have been lent to mega banks like his on terms and at interest rates that were set on the basis that the loans were to the bank as a whole, not to just the investment banking part or the retail banking part.

So if the bank were split up, all of those borrowing agreements would have to be renegotiated - an almost impossible task, which would take years and enrich only the legal profession.

And, what's worse, the uncertainties created by the renegotiation could well lead to a funding freeze for all universal banks subject to the new stipulation that retail and investment banking should be separated. Which at best would prevent these banks from lending and at worst would bankrupt them.

So let's think about this for a moment. How likely is it that the Chancellor George Osborne would wish to call the bluff of Barclays, HSBC and RBS by ordering that they put an unimpeachable legal wall between their investment banks and retail banks, against their advice that to do so would risk destroying them and the British economy?

The chancellor could decide that the appropriate response to any recommendation from the Banking Commission for separation of retail and investment banking would be to argue for this in the G20 and at the EU Economic and Financial Affairs Council. But given that unease with the structure of universal banks appears to be a largely British pre-occupation, that would probably be to consign this kind of organisational and formal change in banking to the dustbin of history.

Perhaps I am mistaken. But I made my meandering escape from Davos largely persuaded that those arguing for a radical overhaul of the global banking system may already have lost the war.

Comments

Page 1 of 2

  • Comment number 1.

    All this user's posts have been removed.Why?

  • Comment number 2.

    Robert, In the real world reform of regulation and banking is vital. Indeed as whole World know knows that the old (and present) system is both corrupt and incapable of avoiding continuous collapse and deeper recession and depression reform will take place - that is the nature of the free market. The market will force reform and the governments will be dragged kicking and screaming along.

    David Cameron, George Osborn, Ed Miliband and Ed Balls will be unable to resist the changes that will impact on their friends in the City and at the Bank. Mervyn King and his old guard are past their sell by date and must go as must the head of HM Treasury. The reason is that there is no trust in the present system and without trust there can be no stability and hence reform must occur. Unless the people are changed, just as in Egypt, than can be no stability.

  • Comment number 3.

    I have said it before and now I'm proved correct; the banks are a lot more clever than the politicians and can run rings round them; and now, it seems, the regulators as well.

    I wish I was wrong.

  • Comment number 4.

    Just a word of thanks Robert for spending time on this and your previous message.

  • Comment number 5.

    This is deeply depressing. No systemic change to the banking system = inevitable future banking collapse in the future. We can argue about when, but not if.
    We have all gone mad.
    http://extranea.wordpress.com/

  • Comment number 6.

    I know I've said it before but the simplest way to sort this Banking mess out is for the government to simply stop (or limit) guaranteeing the savings of retail depositors in any bank that also has a casino banking operation.

    The public would vote with with their feet and the mega-banks would lose their retail depositors, and also the implicit guarentee that tax payers would bail them out.

    Pity it'll never happen...

  • Comment number 7.

    The regulators have already lost the war and institutions are still playing the risk game.

    Banks have already moved so far into commodities and other unregulated products that they couldn't get out, without crashing entire nation state economies, even if they had to.

    As for loans both from and to Governments - who depends on them more?

    I think we know the answer to that - which is why Governments will back down to the "financial blackmail" that can be imposed, should the banks choose to do so.

    ps. if intelligence specialists reckoned that Egypt would not ignite, who ( or what) did "light the match"?

    just whose interests does it serve?
    Not Israel, not Europe, not France and certainly not the UK - judging by our "levels of banking exposure"!

    its ok to be wary of the "powerbrokers" you can see, but be especially wary of those acting against nation states, for financial gain!

  • Comment number 8.

    So if the masters of the universe think its impossible to split the banks into retail and casino then what are the alternative's?

    Maybe one possibility is for the government to start a new 'retail only' bank and the public can then make the split by simply moving their money.

    How about 'The national Bank'.

  • Comment number 9.

    Are we still living in a consensual democracy? Over 80% of the Country insist on reform of the banking system.

    The few thousand bankers are not as powerful as the 20 million ordianriy households who DEMAND things change.

    The current Government won't do it because they are kleptocrats funded by banks.

    In the end there will be reform though. The people demand it, and will demand it at the ballot box or if necessary on the streets.

  • Comment number 10.

    Sure, we've had a history of boom and bust but never a global banking crisis like 2008. If the sytemic risks are not delt with and the banks need bailing out again then I fear global civil revolt will ensue and political, economic and social structures will be swept away.

  • Comment number 11.

    "hundreds of billions of dollars have been lent to mega banks like his on terms and at interest rates that were set on the basis that the loans were to the bank as a whole, not to just the investment banking part or the retail banking part."

    Sounds like confirmation of Vince Cable's key point: the activities of the banks are underwritten by free insurance from the taxpayer. Without that free underwriting they could not get loans on the same generous terms.

    My suggestion?

    Make it clear that only those banks which comply with good practice by splitting retail from spiv sections will receive government protection for customers. Whether they go abroad or not - no good practice, no protection.

    Subsequently all retail bank trade in the UK would be on the basis that all advertising, agreements, signs etc must clearly state the government protection status of the bank. Follow this up with a government advertising campaign bringing this to the attention of customers.

    Let the market decide.

    If customers want to take a risk on the unprotected banks to gain a little extra, that is their choice.

    How many retail customers would do it? Who knows, but in any event the tax payer would no longer be providing free insurance to banks who take excessive risk.

  • Comment number 12.

    There are more important things going on in the world than the moronic musing going on in Davos.
    For example - credit agencies making sure those who fight freedom are suitably punished.
    http://www.bbc.co.uk/news/business-12322465

    ...or the 5 stages of fascism - stage 5 - Eqyptian dictatorship.

    http://www.businessweek.com/news/2011-01-31/egypt-s-military-tightens-control-over-regime.html

    Stage 1 - police using CS gas on people protesting at the tax evasion of corporations by 'pushing leaflets under the door'

    http://www.mirror.co.uk/news/top-stories/2011/01/31/police-use-cs-gas-on-boots-tax-protesters-115875-22887535/

    Wakey Wakey Britain.....not long to go before you find you're under the boot of a private security firm employed by a corporation to "protect their interests" and that the law has been altered to ensure that you have no recourse.

    .....or you can return to the liars who led you here - I'm sure they will welcome you back with open arms and clenched fists.

  • Comment number 13.

    If i were a banker i wouldnt want to break up my casino either so from that point of view i understand where they are coming from.But

    Playing Devils Advocate if we are going to be held to ransom by the big banks then just remove the Guarantee for savings the people will do the rest.

    When they are bankrupt we can then enforce what we want.The cartels need smashed the cost is irrelevant.If the Government dont do it at some point the people will....

  • Comment number 14.

    Solving the debt problems of the peripheral Eurozone countries is one problem but growth is another more important issue. There appears to be a mindset in the ECB and Commission that if they solve the debt issue then all will be well. No it won't! Greece, Portugal, Ireland and Spain have really serious growth issues that are not going to be addressed by simply fiddling with their debts. Looking at their GDP's is useful but a far better indicator of their health is their foreign earning ability and it is abysmal. Without this being high on the agenda it is almost guaranteed that the problems in these countries will only be postponed not solved. They face the likelihood that Eurozone interest rates will go up promoting a stronger Euro just at the time they need a weaker Euro. The core / peripheral European conundrum will be THE issue to focus on in future.

  • Comment number 15.

    "Well, hundreds of billions of dollars have been lent to mega banks like his on terms and at interest rates that were set on the basis that the loans were to the bank as a whole, not to just the investment banking part or the retail banking part.

    So if the bank were split up, all of those borrowing agreements would have to be renegotiated - an almost impossible task, which would take years and enrich only the legal profession.

    And, what's worse, the uncertainties created by the renegotiation could well lead to a funding freeze for all universal banks subject to the new stipulation that retail and investment banking should be separated. Which at best would prevent these banks from lending and at worst would bankrupt them."

    ==================

    Some very coherent points raised about the difficulties of unpicking the financial mess that has been created.

    Perhaps if the G20 financial leaders gave out the message that separation of investment and retail was very much to be the goal of reform - then the banks could very much begin the unpicking process in new loan negotiations and renegotiations.

    It is also a clear admission by the banks, which we knew anyway, that they have been borrowing money from each other to use in mostly risky ways based on a risk profile across the whole banks activities including the safer ones. i.e. precisely the same fault which the subprime mortage market threw up when securitised into CDO formats.
    The rewards from risky activity can be higher but so are the risks- so the rates charged to fund it are higher - this is understood and why interest rates on unsecured credit cards are much higher than on secured mortgages.
    All this shows is that many of the banks are borrowing money based on the dull low risk banking activities that affect the majority of the population if they go wrong and using it to fund higher risk activities which primarily benefit themselves and the wealthy investors.

    Whilst unpicking the mess would take time - if the G20 as one said retail and investment separation would be instigated over a suitable timeframe then banks can begin the process to unpick - not renewing on the nod revolving facilities made on that basis etc. Clearly separating new agreements on this basis.

    It may make the figures from the investment arms look a little worse as the higher charges and risk profiles feed into the accounting but more realistic.
    It should also permit better competition in the retail arms since the very basic secured lending such as mortgages etc would not then be worked out in the banks on the basis of them borrowing the funds at higher composite rates implied by a whole business risk rating.
    Since the corrollary of an overall interest rate for the bank is that risky activities costs are underestimated but also that the less risky activities costs are overstated.

  • Comment number 16.

    #11

    Imagine you bought a three bedroomed family house and took out a mortgage secured on that

    Now imagine that you converted that house into two separate flats and wanted to rent one of the flats out

    Now imagine you wanted to refinance your mortgage to finish the conversion

    Would you:

    a. expect the lender to just give more money on the same terms?
    or
    b. renegotiate terms as the property characteristics have changed?

    That is what is being said that if banks are split, renegotiation would be required as the characteristics have changed

  • Comment number 17.

    "President Mubarak was left in little doubt that he is an isolated figure, who would be spurned by the global elite unless he listens to the voice of his people."

    Robert, I'm confused by this comment. Firstly, I'm not sure what your definition of the "global elite" is but I seriously doubt that this global elite really lose much sleep worrying about the interests of "the people". To suggest that this is the case flies in the face of all evidence.

    If the "voice of the people" coincides with the wishes of the global elite then that voice sometimes gets heard and the elite can pretend they were listening, but otherwise the voice of the people is largely drowned out by the sound of the elite counting their money.

    And when I say voice I don't mean the cross that we put on a piece of paper twice per decade, I mean REAL public opinion, people's REAL needs and desires, not those which we are conditioned into thinking we have.

  • Comment number 18.

    I'll add my vote to a National Bank. Currently with Nationwide so feel reasonably comfortable.

    I also do not understand why National Savings is not pushed more and used as a mechanism by the government for borrowing. Safest investment around I would have thought!

  • Comment number 19.

    Only a better informed UK electorate can change the exploitative and dysfunctional power relationship which allows mega banks, hedge funds, etc., to impoverish the UK tax paying public. We need a sustained public education campaign on how UK citizens are guaranteeing great profits for a small financial oligarchy and are regularly fleeced in return by the same financial upper class. There is no solidarity, no fairness, no ethics, no nothing. Only profit counts.
    You can find some of the arguments needed for such a public education campaign in articles posted on the following web site:
    http://globalinsights.wordpress.com/

  • Comment number 20.

    Do you believe this super banker who is after all motivated to make the difficult look impossible. How did they cope with mergers and de-mergers. Did the major banks conspire to frustrate for ever more a re-imposition of Glass Steagall. Whatever, this argues for supervision more than regulation and retaining a significant public sector presence in the banking industry. Have the USA written off a new Glass Steagall act already. Robert keep going to expose the pin striped Rolex wearing Al Qaeda among us.

  • Comment number 21.

    "I was at a meeting on Wednesday at which an intelligence specialist assured us all that Egypt would not turn into an inferno of protest, only hours before the portals of chaos opened"


    That sums up economists for me. However I'm sure that, in the light of events, they have a different view that they demand we take seriously.

    As regards "the boom is back" I have noticed that my credit card company is getting generous again with credit limits. Anybody else?

  • Comment number 22.

    12. At 12:11pm on 31st Jan 2011, writingsonthewall wrote:

    "Wakey Wakey Britain.....not long to go before you find you're under the boot of a private security firm employed by a corporation to "protect their interests" and that the law has been altered to ensure that you have no recourse.

    .....or you can return to the liars who led you here - I'm sure they will welcome you back with open arms and clenched fists."

    -----------------------------------------------------------------------------------

    Seats booked today on the coach down to The Smoke for the 26th March. I'm not sitting by watching this country sleepwalk into fascism.

  • Comment number 23.

    The fundamental point is that you can NOT regulate the international banks on a national level. The only form of regulation that will work for the mega banks is at an international level or a supra-national level - most obviously the EU.

    Everyone will say that is simply not practical but the point is that EVERY form of national regulation will be met with the arguments

    - this will make us uncompetitive and/or damage the national economy; and

    - this will give us no option but to leave the jurisdiction.

    In the face of those arguments politicians will talk ultimately not take meaningful unilateral action. We will end up with a PR exercise whereby the politicians can pretennd to have done something.



  • Comment number 24.

    Robert,
    First point, Positive Money and the NEF have been invited to make a presentation to the Commission on their proposals for monetary reform, this is a SIGNIFICANT DEVELOPMENT, and deserves your attention. The proposal would be far simplier to implement that seperation of investment banking etc, and would deliver far more stable banking system.
    Secondly, the publication of the Commissions decision this autumn will put the government in a very dangerous position. If the proposals are far reaching and they implement them they put themselves in a difficult position with their banking friends. If they fail to implement them they alienate themselves from the public. This is the sort of situation where making the wrong decision can lead to social uprisings. By this autumn cutbacks and inflation will be having a profound impact on a significant proportion of the public including the educated middle classes. The public will be expecting meaures to be taken to show they hold the banking system accountable for its role in creating this recession/depression.
    Finally, what economic recovery in the USA? Utter nonsence. There is no such thing as a jobless recovery. Thats no different to "almost pregnant".

  • Comment number 25.

    A question if I may to all those who are moaning:

    What have you done to force the issue?

    If your answer is nothing then perhaps you deserve all you get or maybe it is just apathy – one person cannot make a difference.

    One person can make a difference, history as taught us this! You may just be the straw that ‘broke’ the camels back?

    1 becomes 2, 2 becomes 4 and so on, and soon you have a voice buts what more important you have the seeds of a movement. As the movement gains momentum, ears start to hear and very soon they begin to listen. Not long after that change starts to happen. I have said many times I will not march and that I deplore violence but look at Egypt from small seeds the end is now inevitable and it can happen very quickly.

    Ok you may argue that I am only doing what RP as set me and others up to do, by the tone and the way he as written this blog. I have been fighting the banks since 2005/6 in my small way, I have no idea when RP had his senior moment, so that makes 2, now we need 2 more.

    Just move your money out of the UK’s big 4 and lets see what happens?

    Or are you just going to sit and meditate and wait for some one else?

    P.S. no one is saying it is going to be easy!

  • Comment number 26.

    How much did this little gig co$t......can't help feeling that smoke & mirrors was the order of the day..

  • Comment number 27.

    Robert

    I did warn you at the outset that Davos is a waste of time. These are people who do not live in the real world; they float above it in defiance of gravity. How long can that last? Even Jesus only walked on water.

    The bankers have, as usual, not thought this through. They have the taxpayer guarantee which is sufficient for now but is evidently insufficient to survive the next shock. What will they do then? Sell the children?

    It is quite evident that the bankers feel thay have got the world where they want it: at their feet and grovelling. Do they honestly think this situation is sustainable? They can opine in any way they want to but as I have said before I don't care what they think.

    We need banking reform and we need it now. Bankers have to allow the rest of us to move on. The alternative is that the bankers become allowed to subvert democracy and reintroduce slavery.

    Robert, a battle might have been lost but the war is far from over. Our big battalions were not at Davos, it was a side show. There is either reform or there is revolution. With reform the bankers get to keep their heads on their shoulders. It is their choice.

  • Comment number 28.

    #16. At 12:24pm on 31st Jan 2011, yam yzf

    Interesting reply.

    On the model I propose, I would not see this as an issue for government.

    It is a commercial matter.

    If the banks perceived a need to re-negotiate with other banks or commercial interests then they should do so.

    My aim would be to address the terms on which the taxpayer underwrites the banks without charge. This is clearly a matter for government.

  • Comment number 29.

    I assume all those calling for a separate retail bank where they can vote with their feet will never take out a fixed-rate mortgage ....

    Those directly link retail customers with financial derivatives traded by the investment banks.

  • Comment number 30.

    Just because a thing is hard to do, doesnt mean we shouldnt do it! To do nothing will be criminal and would just allow the banks to carry on unhindered by the crisis they have caused

  • Comment number 31.

    Robert, what you are saying is that not only are the banks too big to fail, but too big to change. They hold more effective power than any government, and until there is collectively bigger swinging appendage able to slap their faces, they can safely assume things are back to normal.
    The solution is a joining together of warring tribes to defeat this menacing beast, who is calm at the moment, but sooner or later will attack the villages and eat a few of the children. Unfortunately, at the moment the mistrust is greater than the fear of losing children!

  • Comment number 32.

    18. At 12:25pm on 31st Jan 2011, Baz wrote:
    I also do not understand why National Savings is not pushed more and used as a mechanism by the government for borrowing. Safest investment around I would have thought!

    ----------

    Simple - they are not allowed to take too much market share, by law, even if that's what "the voice of the people" is asking for. They even withdrew certain savings products when it became clear that money was pouring out of banks and into NS&I.

    But why would there be a law to prevent the money of ordinary, hard-working savers flowing from a barely solvent bank paying 0.5% (before tax) and into a safe as houses government scheme paying RPI +1% tax-free when that is clearly a good deal for the government and savers alike? If anyone needs to be told the answer to that then I suggest they start opening their eyes and thinking for themselves.

  • Comment number 33.

    Robert,

    "The boom is back" said one of the world's more powerful bank bosses; "We're beginning to lose the battle for change", said an influential regulator.

    This just demonstrates the incorrigibility of the banking system and the helplessness of the regulators.

    It doesn't matter, time is running out for the 'powerful bank bosses'.
    How will they cope when the population decides it doesn't need them and doesn't want them anymore ?


  • Comment number 34.

    Sarkosy won't want to upset the French banks because they actually support their industry. The only banks that don't are the British ones so if Govt loses this argument or is just too damn cowardly to take the banks on properly then I recommend we stop educating engineers, shut all the research universities and save ourselves a whole heap of money.

  • Comment number 35.

    In my opinion banks have been punished enough these last few years. Government assistance has not been free, large portions of UK banks are owned by the state, banks shareholders have felt immense financial pain. Liquidity was the problem during the crisis, and now banks hold more capital. We have all felt pain and we have had some change for the better.

    It’s time to embrace the forthcoming growth in our financial services industry that will yet again generate massive injections of tax revenue for our country. Maybe it’s time to look at some potential return from our wrecked banking sector, rather than constantly kicking them while they are on the floor. The bank bashing has got to stop. I personally would like by share holding to recover from the depths of despair, this continued bashing is not helping.

    Stop it and let’s move on.

  • Comment number 36.

    @12 WOTW

    I have been boycotting Boots ever since they made Andy Hornby (of HBOS infame) CEO.

    @5 Extranea I enjoyed the banking jokes - nothing like a bit of gallows humour - speaking of which ...... - or perhaps not (yet) ;-D

    Robert: For nearly a century, economists like Keynes, Galbraith and Krugman have been trying to save Capitalism from itself, but have so often been hindered by the stupidity and short-sightedness of the capitalists.

    The biggest problem with capitalism now is that banking and the City have become increasingly divorced from what should be Capitalism's main concern: the production and marketing of goods and real services.

    British bankers are convinced of their own utility, whilst gradually creating an industrial desert around them. It hasn't yet dawned upon them that they won't be able to make a living by selling sand to each other.

  • Comment number 37.

    35. At 13:01pm on 31st Jan 2011, Richard Richardson wrote:
    In my opinion banks have been punished enough these last few years. Government assistance has not been free, large portions of UK banks are owned by the state, banks shareholders have felt immense financial pain. Liquidity was the problem during the crisis, and now banks hold more capital. We have all felt pain and we have had some change for the better.

    It’s time to embrace the forthcoming growth in our financial services industry that will yet again generate massive injections of tax revenue for our country. Maybe it’s time to look at some potential return from our wrecked banking sector, rather than constantly kicking them while they are on the floor. The bank bashing has got to stop. I personally would like by share holding to recover from the depths of despair, this continued bashing is not helping.

    Stop it and let’s move on.

    ................
    I have pulled up my chair and await the replies with relish.

  • Comment number 38.

    35. At 13:01pm on 31st Jan 2011, Richard Richardson wrote:

    > In my opinion banks have been punished enough these last few years.
    > We have all felt pain and we have had some change for the better.

    No - bankers (even ones who post here) boast that they have felt no pain.

    > this continued bashing is not helping.

    When we see humility it will cease. While we see hubris piled on hubris, bankers will be bashed. They are too big to fail, and must become too small to ever threaten the British people again.

    Size taxes. Now!

  • Comment number 39.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 40.

    38. At 13:14pm on 31st Jan 2011, Jacques Cartier wrote:
    35. At 13:01pm on 31st Jan 2011, Richard Richardson wrote:

    > this continued bashing is not helping.

    When we see humility it will cease. While we see hubris piled on hubris, bankers will be bashed.
    =============================================================

    Or a few them can turn up on 26th March to the TUC rally, explain what makes them so very special, explain why they need to continue to be special, then explain why they messed things up for everyone, then explain why they still think they are special and then apologise. The first 6 to do so get let off, all of the others get shipped off to Siberia for a few years of low paid, proper graft.

  • Comment number 41.

    I'm afraid a century of indifference on the part of the world proletariat has allowed the bankers to control governments and make regulation impossible!
    The world has only two choices now. Accept the financial slavery they planned over a century ago, or totally destroy the world banking system! This would of course lead to decades of unimaginable hardship! Either way, the suffering would be immense, but at least, the second way would guarantee the bankers get roasted right alongside you!

  • Comment number 42.

    Please stay with me on this:

    A couple of years back we needed a new Dish Washer so we in to our local mega store and the assistant asked if we wanted help. We said we want to buy a Dish Washer - she showed us rows of the dam things, all of them had a function for this, a function for that and some even played tunes when they had finished. I explained all we wanted was one with a start button and a normal and intensive wash selector. So you do not want it to make toast at the same time and double up as an egg boiler, she said. NO! Just to wash the dishes! She took us to the corner of the show room and there was just what we wanted and at half the price of the others. She was quite upset when I said no to the extended warranty? I wonder why?

    The moral is: why should I pay for something I do not want or need and if we swap Dish Washer for Current Account and Mega Store for bank the scenario is the same!

    Oh but I get free holiday insurance – check the small print and ask those who got stuck abroard?

  • Comment number 43.

    Banks trying to hide behind the 'complex' excuse again.

    They created the illusion that what they do is so highly complicated to justify their bonuses and wages, while running the economy into the ground. it worked once but it won't again.

    In a democracy we would vote with our feet and take all our money out of the banks who refuse to split up. Ofcourse this 'run' on the banks would be stopped by the plutocracy and it will be Argentina all over again.

    The further down the road we get, the more apparent it becomes nothing will ever change and the next crash will wipe us all out.

    I am really coming around to the Zeitgeist philosophy. The closing scenes of the latest movie are so prophetic, that if things don't change our kids and grand kids will call us all stupid for meekly allowing Capitalism to turn to Fascism.

  • Comment number 44.

    > So if the bank were split up, all of those borrowing agreements would
    > have to be renegotiated - an almost impossible task, which would take
    > years and enrich only the legal profession.

    There would be no "renegotiation". The lenders knew the risks when they made the borrowing agreements. They always know that banks are subject to soverign government. That's life.

  • Comment number 45.

    Nice to see that the spivs are looking to make some money from a nation trying to break free from a dictatorship and just have a better standard of living.

    Milton Friedman and Alan Greenspan would be so proud of them. The rest of us however just see them as parasitic leeches who have zero morality.

    http://www.bbc.co.uk/news/business-12322465

    Highlights from the above story

    Concerns that the unrest in Egypt could spread also knocked European stock markets, with shares in airlines and travel operators taking a hit.

    Oil prices had been pushed higher by fears that supplies could be disrupted if the protests led to the closure of the canal, which connects Europe and Asia.

    On Friday, shares in shipping companies rose, when worries over the Suez Canal began to emerge. Its closure would mean ships would have to travel around the southern tip of Africa, adding thousands of miles to their journeys, and traders speculated that the tanker owners would be able to charge accordingly.

  • Comment number 46.

    Aweful though it would have been for all of us, the only real chance of dealing with this risky system was to let it fail when it obviously had. We used to have retail only banks, they were called building societies but no sooner were they freed to behave like other banks than many of them collapsed. We do need more retail only institutions, with very stringent capital requirements and conservative lending ability. We need to be able to take away the state guarantee from the others and only have it for those that operate conservatively. An when things go wrong, the govenment should not be able to destroy conservative banks by encouraging them to take over those who are obviously not fit for business, as happened with Lloyds TSB and HBOS.

    The real difficulty seems to be that regulators and governments are completely unable to see risk when it is staring them in the face - we still hear it said that nobody saw the financial crisis coming - surprise, surprise, many saw it coming but nobody wanted to hear them. As you rightly point out, we're already in that position again. Until it ends in real tears, nothing will change.

  • Comment number 47.

    There appears to be a fixation on splitting up the casino style investment banking and the 'safe' retail banking. If that had happened 5 or 6 years ago, it would have made no difference for HBOS and Northern Rock. RBS may have still gone, surely funding the takeover of another bank with cash (leaving a massive funding gap)rather than shares, without carrying out proper due dilligence was the cause, that's not investment banking.

  • Comment number 48.

    Protests against the current system is regulated by the system. So, new forms of protest appear:

    http://www.bbc.co.uk/news/technology-12307802

    Treated as illegal of course.

    Now look at the real reasons for such protests, as linked to by BBC:

    http://anonops.webs.com/ANONYMOUS-PRESS-RELEASE_27-01-2011.pdf

  • Comment number 49.

    41. At 13:33pm on 31st Jan 2011, Crystal Ball wrote:
    I'm afraid a century of indifference on the part of the world proletariat has allowed the bankers to control governments and make regulation impossible!
    The world has only two choices now. Accept the financial slavery they planned over a century ago, or totally destroy the world banking system! This would of course lead to decades of unimaginable hardship! Either way, the suffering would be immense, but at least, the second way would guarantee the bankers get roasted right alongside you!

    .....
    I don’t believe destroying the banking system would lead to decades of hardship. Never forget that money is an artificial construct. It is not real “wealth” merely a medium of exchange. Real wealth is the crops we grow, the products we make, and the material resources we extract from the ground. They will always be worth something even if money is not.

  • Comment number 50.

    If the G20 want to do something and there is the collective will, nearly anything can be achieved.

    As the reported suggested, clearly, the will to force systemically important banks to maintain a higher level of capital is absent from France (or other countries), there will be no further action to this. Simple. Anyway, higher level of capitalization will be reflected in lower level of lending. In an era where governments are encouraging banks to lend more, this will not wash.

    The second point was splitting of investment banking from other areas of banking (retail and commercial). Thinking back to the Glass–Steagall Act in 1933, does anyone actually think that banking was less complex back then? If there is a will, there is a way. However, be warned. If you go it alone, you risk losing the whole plot.

  • Comment number 51.

    Robert thanks for an interesting article which you close by saying
    ". . . those arguing for a radical overhaul of the global banking system may already have lost the war."
    Sadly, I think this has been a phony war for sometime. As #23 Cassandra said this is no more than a PR exercise by the politicians and regulators.
    The truth is that if one looks at the history of bankers in both Europe and the USA over the past 150 years, most of the time they have ultimately won. Of course, they have lost a few battles, 1933 and the Glass-Steagall Act being one of those rare moments.
    The opportunity for some radical reform has probably been allowed to slip away, at least until the next crisis.
    The bankers in their ivory towers who have watched their stock value climb and their bonuses return (albeit it not without challenges), who view their world through stock prices, profits and bonuses are probably convinced that things are really getting better. Well for them, they are!
    But for a larger number of people, things have got worse and are likely to get a whole lot worse over the next two years. Sadly, these kinds of people, who we can call the unemployed, pensioners, students and others do not have effective representation in their own country if we are talking about the UK or the US or Europe.
    Some politicians may go to Davos to be seen mingling with the elite, but just like the journalists they are no more than observers. Their interests are in the main, national in context. They get to sit at the high table and talk about global issues; but the reality is that the true global players are the businesspeople. Those unelected, non-representative individuals whose agenda is rarely conguent with those of 'the people'. The truth is Robert, most of them do not give a toss about 'the people' any more than Marie Antoinette. That is why there is no war, simply murmurings of discontent which the elite will be able to ignore so long as the people are 'represented' by politicians who are more comfortable meandering around the salons of Davos, than engaging in the real world with real people many of whom don't understand what has happened or why it happened in the first place.

  • Comment number 52.

    @ 47. At 13:43pm on 31st Jan 2011, moof_attack wrote:

    > splitting up the casino style investment banking and the 'safe' retail banking.

    That's just one way to split them down to size. Take your pick.

    > If that had happened 5 or 6 years ago, it would have made no difference for
    > HBOS and Northern Rock .. RBS

    The credit crunch, caused by “too big to fail” banks that started to go under, did for both of those. Check it out yourself, before spreading more of this sort of mis-information. If those banks had been small, no crunch could have occurred, ergo it would have made a difference.

  • Comment number 53.

    All this user's posts have been removed.Why?

  • Comment number 54.

    The argument about the difficulty of renegotiating historic loan rates for the different parts of the banking business could be cut through very easily. The loan rates are historic - simply apportion the debts and loan repayments between the different elements of the business. Going forward, the different parts of the business with different risk profiles will pay interest rates that reflect those risks. Over time the historic loans will wash out of the system (assuming that they are repaid).

    The drawback with this approach is that some may see it as too slow in applying an interest rate sanction to business models with a high risk profile since it would leave them with a portfolio of debt payments negotiated at different times. The way the mix of that debt would move over time would depending on the extent to which the managers of the business attempted to optimise short or medium-term returns.

  • Comment number 55.

    did anyone see the new head of the CBI on TV earlier saying the funding cuts in higher education is "an opportunity for the private sector to get involved in university funding" (or words to that effect).

    That's all we need - the banks loaning money to both the students and the universities!

    sounds like a nice growth market for the banks.....and all guaranted by the state no doubt. If a university can't pay it's debt's who do you think will have to cough up?

  • Comment number 56.

    "President Mubarak was left in little doubt that he is an isolated figure, who would be spurned by the global elite unless he listens to the voice of his people."

    sorry Robert - Have you heard one single western politician say the Mubarak should go? just one? if so who?

  • Comment number 57.

    @35 Richard Richardson.

    "Bankers have been bashed enough"? Tell that to all those who lose their jobs and homes next year because of the ongoing crisis caused by the banks and the government cuts allegedly needed to pay for it.

    "It’s time to embrace the forthcoming growth in our financial services industry that will yet again generate massive injections of tax revenue for our country". Banks produce nothing useful, they are a service. Even if your FAITH were justified, banks only become really rich by extracting wealth from the real economy. Just because Peter pays taxes, that does not justify Peter robbing Paul (© NEF). BTW the "recovery" of financial services has already caused and increase of 6.2% in London property prices. but a fall of 3.3% in the North-East. (Source BBC Text news.)

    "I personally would like by share holding to recover from the depths of despair, this continued bashing is not helping."

    Aah Diddums! Despite the destruction the banks have wrought, you would like us to shut up for the sake of your share value? As it happens, in spring 2008 I bought £5K worth of Lloyds shares, on the belief that it was risk averse. The shares are now worth about £300. However, I would happily write off the lot if it meant that we could get to a sane model of money and finance. This means the destruction of banking as we currently know it.

  • Comment number 58.

    ". . . those arguing for a radical overhaul of the global banking system may already have lost the war."

    As I see it, there have only been a few brief skirmishes.

    Look at the BBC.
    I note on BBC 5; access to the following is available:

    Two animated films by Paul Grignon.
    Money as Debt
    http://www.bbc5.tv/eyeplayer/video/money-debt
    Promises unleashed
    http://www.bbc5.tv/eyeplayer/video/money-debt-ii
    And ‘The Secret of OZ’
    http://www.bbc5.tv/eyeplayer/video/secret-oz
    And ‘Collapse’
    http://www.bbc5.tv/eyeplayer/video/collapse
    And ‘Quantitative easing explained’
    http://www.bbc5.tv/eyeplayer/video/quantitative-easing-explained
    And ‘Zeitgeist Addendum’
    http://www.bbc5.tv/eyeplayer/video/zeitgeist-addendum

    If enough people ask enough questions……………..

  • Comment number 59.

    52. At 14:01pm on 31st Jan 2011, Jacques Cartier wrote:
    @ 47. At 13:43pm on 31st Jan 2011, moof_attack wrote:

    > splitting up the casino style investment banking and the 'safe' retail banking.

    That's just one way to split them down to size. Take your pick.

    > If that had happened 5 or 6 years ago, it would have made no difference for
    > HBOS and Northern Rock .. RBS

    The credit crunch, caused by “too big to fail” banks that started to go under, did for both of those. Check it out yourself, before spreading more of this sort of mis-information. If those banks had been small, no crunch could have occurred, ergo it would have made a difference.


    What utter rubbish - HBOS and NR went because no-one in the money markets would lend to them. The massive funding gap (with massive maturity mismatches) was built up over a period when money was cheap, and lent mostly to corporates and individuals (a lot trying to make a quick buck in property). Neither had investment banks, they went as questions started to be raised about the quallity of the lending. This is not investment banking, it's just bad management.

  • Comment number 60.


    Blame is systemic. There are many fault-lines....all needing to be addressed.

    One such fault-line was personal credit availability. I know about a half-dozen individuals who became credit card 'tarts' ; two of them openly admit to having lied significantly on their multiple application forms. I am sure that many of us know others who lied about their incomes on 'liar' loan mortgage applications.

    Would in not be possible for each person in the country to have a Fiscal Code Identity granted by a new dept. within the FSA ? Any loan/credit card/ overdraft facility would require registration of details by a given individual using say the Electoral Register and National Insurance Number and Tax Returns as cross reference points.

    Flags would be raised in warning. Any bank or registered money lender would need FSA prior approval for an extension of an individual's credit .

    Better controls of Banks and Borrowers and a few extra jobs generated at the FSA to mop up some of the UK's unemployed !

    Reckless lending and reckless borrowing need to be curtailed. Right down to the micro-level.... individuals, firms, and institutions.

    Sensible lending and sensible borrowing to be allowed to help the economy to find some greater strength. Reform would be easier against the backdrop of a stronger economy.

    I think Mr Peston that further institutional reform should take place slowly, with genuine understanding between all participants allowed to become established first. The Banks need a while yet to recover. And your personal apparent hostility towards the banks needs addressing. I think you need to be more mindful of the distinction between (some) Bankers and the Banks as Institutions.

    It is time too for politicians to show both leadership and tolerance towards the Financial Sector. And not to use the City for political point scoring in persistent attempts to avoid wider public discussion on reform of the Regulatory System , The Treasury, the TSC, and the Financial and General Mass Media.

  • Comment number 61.

    Perhaps Govt could find a way to recoup pre-natal care costs by setting up loans in the unborn baby's name. If they got the banks involved they could even have credit cards all ready for them when they pop out.

    Remember we're all in this together.
    We all have to do our bit.



  • Comment number 62.

    "35. At 13:01pm on 31st Jan 2011, Richard Richardson wrote:
    In my opinion banks have been punished enough these last few years. Government assistance has not been free, large portions of UK banks are owned by the state, banks shareholders have felt immense financial pain. Liquidity was the problem during the crisis, and now banks hold more capital. We have all felt pain and we have had some change for the better.

    It’s time to embrace the forthcoming growth in our financial services industry that will yet again generate massive injections of tax revenue for our country. Maybe it’s time to look at some potential return from our wrecked banking sector, rather than constantly kicking them while they are on the floor. The bank bashing has got to stop. I personally would like by share holding to recover from the depths of despair, this continued bashing is not helping.

    Stop it and let’s move on."

    Go easy on him lads...

  • Comment number 63.

    The helpful BBC article on why Lehmans was not saved said that it was too complex to save.
    Now we are told that the big banks are too complex to regulate. Yet they benefit massively from implicit taxpayer guarantees - i.e .the assumption that they will be saved when Crisis 2 hits.
    It suits the banks to be seen as too complex to regulate, but not too complex to save - and we are expected to swallow this bull?
    If the banks are too complex to regulate, they are too great a danger to society, and should be wound down - bad banks.
    New banks with separate retail and commercial arms are started - good banks.
    It worked for Northen Rock.


  • Comment number 64.

    12. At 12:11pm on 31st Jan 2011, writingsonthewall wrote:

    Wakey Wakey Britain.....not long to go before you find you're under the boot of a private security firm employed by a corporation to "protect their interests" and that the law has been altered to ensure that you have no recourse.

    ==============================================================

    Like in the original film Rollerball where history and knowledge of alternatives are
    erased.

  • Comment number 65.

    Talk about smelling the coffee - this is an outcome that has been obvious for many months. The storm around banks is now a UK issue, driven as much by coalition politics as anything else. Even this is blowing out as the good ship St Vincent seeks shelter.

    Osborne of course blundered by asking the Banking Commission a question when he hadn't secured the answer, but although ignoring it might the embarrassing, there is no way that the party that destroyed manufacturing in its last term is going to sink financial services in this one.

  • Comment number 66.

    59. At 14:24pm on 31st Jan 2011, moof_attack wrote:

    "This is not investment banking, it's just bad management."

    management? - please tell me - who is managing capitalism?

    The players have played their part but the game is a lost one to begin with.

  • Comment number 67.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 68.

    35. At 13:01pm on 31st Jan 2011, Richard Richardson wrote:

    "Stop it and let’s move on."

    yes - millions have already...when they lost their jobs due to a credit crunch induced recession and they were forced to 'move on' from their homes.

    Your efforts to appease the anger directed towards banks is almost as fanstastical as Butros Butros Gali's attempt to justify the Eqyptian dictatorship on Friday night.

    "It's just a few protestors....most people like President Mubarak and all this will blow over...."

    Oh how the misguided stare the bull in the face and insist that it is definitely a bullock.

  • Comment number 69.

    A couple of comments from others:

    "My aim would be to address the terms on which the taxpayer underwrites the banks without charge. This is clearly a matter for government."

    "There appears to be a fixation on splitting up the casino style investment banking and the 'safe' retail banking. If that had happened 5 or 6 years ago, it would have made no difference for HBOS and Northern Rock"

    So why not make the terms relate to the way that each institution funds its lending and manages its risk, rather than its specific structure? Then let the public vote with their money...

    Well...

    "I assume all those calling for a separate retail bank where they can vote with their feet will never take out a fixed-rate mortgage ....

    Those directly link retail customers with financial derivatives traded by the investment banks."

    The implication being that the expectations of the public are now so far removed from what is inherrently stable that they wouldn't respond to this change in the terms of the government guarentee, and would leave their money open to risk. (Not enitrely unreasonably, the benefits are short term and obvious, the risks long term and abstract)

    What would a future government do? Would they stand by the terms of the agreement when maybe millions of its citizens lost all of their savings? I doubt it.

    It seems to me we are well and truly stuck. The whole system may be unsustainable (in some time frame) and, if so, the only way to fix it is for it to first collapse completely.



  • Comment number 70.

    59. At 14:24pm on 31st Jan 2011, moof_attack wrote:

    > What utter rubbish - HBOS and NR went because no-one in the money markets would lend
    > to them.

    Technically true. We welcome simplification, but not obnoxious over-simplification. Please do some homework before making these one-sided, and wrong-headed statements. Why do you think no-one in the money markets would lend to them ?

    > The massive funding gap (with massive maturity mismatches) was built up
    > over a period when money was cheap, and lent mostly to corporates and individuals
    > (a lot trying to make a quick buck in property). Neither had investment banks....

    Next you'll be telling us that Lehmans and RBS were just a coincidence eh? Pull the other one – it's got bells on it! I'll help you out though - here's a tip for you. Sub-prime. Got it yet?

    (Geez, some of these new guys on the block have a lot of front, eh?)

  • Comment number 71.


    • 48. At 13:46pm on 31st Jan 2011, UKGoingBust wrote:
    Protests against the current system is regulated by the system. So, new forms of protest appear:
    http://www.bbc.co.uk/news/technology-12307802
    Treated as illegal of course.
    Now look at the real reasons for such protests, as linked to by BBC:
    http://anonops.webs.com/ANONYMOUS-PRESS-RELEASE_27-01-2011.pdf
    --------------------------------------------------------------------------

    I’m an average working Joe, and this weekend a few of us were discussing Wikileaks.
    And without exception, all of us supported what they had done.

    So Anonymous, well done and good luck.


  • Comment number 72.

    Goldman Sachs -

    "A huge vampire squid wrapped around the face of humanity sticking its blood funnel into anything that smells of money"

    Personally, I'd go with Ripley on this one: "I say we take off and nuke the entire site from orbit. It's the only way to be sure."

  • Comment number 73.

    Davos: Where the battle for financial reform was lost?
    Lost?
    Well, someone better find it again!
    As you say "the eminences at Davos aren't always that brilliant at spotting the next crisis", and there will be a next crisis: It will come as the derivative bundles unfold and must be moved to uncollectible/bad debts and eventually written off.
    As for Mubarak was he left in little doubt that he is an isolated figure? Oh, you must mean except for the western support from the United States and the UK, both of which are talking about an "orderly transition" - Whatever that means?
    If it means from Mubarek to Sulieman, that will bring the most disorder because the Egyptian People want neither. They want ElBaradei.
    Okay, to your two obsessions:
    1. how to mend the banking and financial systems; and
    2. how to fix the eurozone.
    I can't agree that there are signs of strengthening recovery in the US. Talk to me when the unemployment rate goes down, or when these figures change significantly (downwards):
    United States National debt: $14,097,280,950,160; that's 14 TRILLION and rising as I type.
    Interest on debt: $3,533,906,601,201; that's 3 TRILLION and rising as I type.
    The American debt is just about equal to the entire GDP for one year.
    The American debt is not sustainable. If the United States was a European country it would be considered a PIIG and its credit rating would not be AAA.
    Yes indeed: the more some kind of APPARENT "normality" returns to economic life, the more that politicians fear a return to recession caused by nefarious financial products that have yet to go "pop" and failure to reform, especially in the United States of America where investment banks too big to fail run the economy.
    President Sarkozy would oppose any capital surcharge on Globally Significant Financial Institutions, or the mega banks. Does this mean that he would also contest a Financial Activities Tax uniformly applied throughout the Eurozone because I heard that Sarkozy does support such a Tax, as does Germany's Merkel.
    The Americans of course will object, meaning that it cannot become global, but then again the investment banks too big to fail run the American economy.
    As for holding more capital, I think Basel requirements are enough IF
    - the investment banks are split from the retail banks. Community banks are not that subject, exposed to failure; these are mom & pop banks lending to medium and small business and individuals. They are not gambling, risk-taking.
    The investment banks are gambling casinos and those who want to play are free to play as long as they are aware of what they are getting into. If these banks fail to hold sufficient capital, they will go bankrupt; so, make a provision to let them go bankrupt, and as far as I'm conerned, that's the end of that.
    The investment banks to big to fail have never been big lenders to individuals or small to medium size businesses; they're too busy gambling, generating nefarious financial products and developing high speed trading.
    As for the need to inject more capital, this need disdappears once you have split investment banking from community banking, and warned the investment banks that they are on their own.
    I'm not sure what you mean by "surcharge".
    In Canada, I would not sign up for a "surcharge" either, but I would support a financial activities tax, and here's why:
    Community banks have limited transactions when compared with investment banks; I would be tempted to even eliminate community banks from the pool of banks to be taxed because they are helping the economy - lending to individuals, small and medium-sizex business. They are not betting and taking risks, except that the odd loan may go into bad debt or write-off.
    Investment banks should be subject to a financial activities tax because this is there bread & butter, provides an audit trail to stop nefarious financial instruments, and these guys are in transactions for the risk and the big money that risks can bring. So, I have no problem slapping a little tax on all financial transactions - say 0.05%, which by the way, would raise bullions to be applied to the damage caused by these investment banks to big to fail, as well as (and more importantly) alleviate the debt from the backs of taxpayers.
    As for your spokeperson who said: :the interconnection of retail and investment banking is now so intense, thorough and complex that it would be impossible to unscramble. Investment banks have picked the pockets of retail banking, and this must stop. I don't care how hard it is to seperate them. Don't let anyone tell you that it cannot be done; in fact, it can be done, and what you are likely to find will likely be plenty of illegality because of the lack of ring-fencing, and this is probably why the investment banks are so resistent.
    As for the bank transfering all its international investment banking out of the City of London to operations elsewhere in the world, what do you care? I've had enough of this threat. Countries need retail banking; they do not need, they do not profit from investment banks, especially those to big to fail. So just say "Good-bye", and move the affected workers from these megaliths to retail branches.
    Such separation would bring out nefarious trading practives, and that is what these investment banks FEAR.
    Hundreds of billions of dollars have been lent to mega banks on terms and at interest rates that were set on the basis that the loans were to the bank as a whole, not to just the investment banking part or the retail banking part. Excuse me for mentioning I don't think this inter-mix is legal.. IT'S CALLED LACK OF RING-FENCING.
    So if the bank were split up, all of those inter-mixed borrowing agreements would have to be renegotiated after they have been through court and all persons affected have been reimpursed for any losses that came as a result of misusing their deposits.
    But you made my meandering escape from Davos largely persuaded that those arguing for a radical overhaul of the global banking system may already have lost the war.
    Fear not.
    I believe a financial activities tax is on the way - likely next G20. It will be EURO-WIDE, if not global, and will apply to any and all transactions that move through the UK no matter where the HO may be. Is there a bank out there that for the sake of 0.05% tax will absolutely not trade with any part of thre Eurozone?



  • Comment number 74.

    66. At 14:46pm on 31st Jan 2011, writingsonthewall wrote:
    management? - please tell me - who is managing capitalism?

    The players have played their part but the game is a lost one to begin with.

    -------------------------------------------------------------------------

    You'd hope it would be the politicians, but I'm not going to hold my breath on that one.
    They all appear to go to the same schools and universtities, and never do a job outside of politics.
    They're supposed to be the ones best placed to make the big decisions, and yet the vast majority of them don't appear to understand the difference between the deficit and the national debt.

  • Comment number 75.

    63. At 14:42pm on 31st Jan 2011, donc1 wrote:
    It suits the banks to be seen as too complex to regulate, but not too complex to save - and we are expected to swallow this bull?
    ==============================================================

    Yes and it suits the bankers to tell us they are so talented and their job is so complicated that if they don't get paid telephone numbers they will leave the country.

    What's complicated about populating spreadsheets, running formulae and the gambling the output aka 'a portfolio of investments' based on a load of self-assessed risk? Nothing - it isn't their money.

  • Comment number 76.

    65. At 14:44pm on 31st Jan 2011, trippingpoint wrote:
    Talk about smelling the coffee - this is an outcome that has been obvious for many months. The storm around banks is now a UK issue, driven as much by coalition politics as anything else. Even this is blowing out as the good ship St Vincent seeks shelter.

    Osborne of course blundered by asking the Banking Commission a question when he hadn't secured the answer, but although ignoring it might the embarrassing, there is no way that the party that destroyed manufacturing in its last term is going to sink financial services in this one.
    ....
    I think it may prove more than embarrassing. It’s the equivalent of putting up the finger to the population who will be paying for the mistakes made by the banking elite. When governments do that, the population tend to show them who is boss.

  • Comment number 77.

    @ 66. At 14:46pm on 31st Jan 2011, writingsonthewall wrote:
    >> 59. At 14:24pm on 31st Jan 2011, moof_attack wrote:
    >> "This is not investment banking, it's just bad management."

    > management? - please tell me - who is managing capitalism?

    I know. Poor moof_attack thinks he can just phone up "management"
    and ask them to stop loaning money to the Sir Greedies and Adam
    Applegarths of this world...

    The whole point of breaking them up is to hobble his "management" in the
    first place, so it makes no odds what they do. So let's get to the size taxes;
    soon please.

  • Comment number 78.

    Whats actually happening at the moment?

    Gideon Osborne says yesterday that Britsh companies have accumulated billions of pounds worth of savings that they wont invest or spend. The 4 biggest UK banks announced profts of £24Billion. Bonuses are back and as big as ever. Pay rises for FTSE Directors were worth 55% last year.

    On the other hand, for normal people there is a 12% drop in living standards, rising bills, no prospect of a pay rise, 9% unemployment (20% if you are a young adult), inflation at 6-7%, horrible cuts in benenfits and public sevcies, a marginal tax rate of 83% for many.

    The Governements response- raise taxes on consumers (e.g all of us) and lower taxs on those with obsence profits and savings (banks and multinationals). If they have 5% of GDP saved up they dont need any "incentives" to spend. Yet still it is the normal public thats getting the kicking.

    Class warfare as well as really stupid economics.

  • Comment number 79.

    What happened to the Girobank? Wasn't that a government owned 'national bank'? If that was still operating under state ownership I wonder how many people would have bailed out of the 'troubled' banks and into it?

  • Comment number 80.

    RP wrote:
    'It's this tension between short term prosperity and long term stability which could bring the reform train to a grinding permanent halt'

    That would be a sad business indeed.
    My personal experience from speaking to friends and associates is, that ‘Banks’ are universally disliked. If you’re a saver you have been hit, if you’re a debtor you’ve been hit, and if you’re young enough to be a student in the near future, you’re about to be well and truly shafted.

    This debt based monetary system hasn’t wrecked most people’s lives, but the casualty list does seem to be growing.


  • Comment number 81.

    70. At 15:01pm on 31st Jan 2011, Jacques Cartier wrote:
    59. At 14:24pm on 31st Jan 2011, moof_attack wrote:

    > What utter rubbish - HBOS and NR went because no-one in the money markets would lend
    > to them.

    Technically true. We welcome simplification, but not obnoxious over-simplification. Please do some homework before making these one-sided, and wrong-headed statements. Why do you think no-one in the money markets would lend to them ?

    > The massive funding gap (with massive maturity mismatches) was built up
    > over a period when money was cheap, and lent mostly to corporates and individuals
    > (a lot trying to make a quick buck in property). Neither had investment banks....

    Next you'll be telling us that Lehmans and RBS were just a coincidence eh? Pull the other one – it's got bells on it! I'll help you out though - here's a tip for you. Sub-prime. Got it yet?

    (Geez, some of these new guys on the block have a lot of front, eh?)


    By subprime you mean the lower risk rated tranches of packaged up debt, usually parcelled up by US investment banks and sold around the world to unsuspecting customers with a promise of low risk and high rate of return. (The low risk tag being paid for by the banks themselves in fees to the ratings agancies).
    If so, HBOS & NR didn't have much, if any exposure to this, their exposure was not through investment in complex instruments.
    They lent badly, I don't need to simplify it because it really isn't complicated.

  • Comment number 82.

    I met up with an old retired friend recently who happens to be a retired historian. Following a fair bit of discussion we came to the conclusion that the government are walking a tight rope and failure to make the right decisions could be dangerous. They have 3 options;
    Side with the people and risk “war” with the capitalists
    Side with the capitalists and risk “ war” or “revolution” of the people
    Try and make compromises to both sides to appease them.
    The government may be aiming for the last option. However, this is dangerous as it could result in them alienating themselves from both sides. The safer option would be the 1st option as the people are many and the capitalists are few. We agreed that the dangerous point will be this autumn when the Banking Commission produce their findings/recommendation and the realities of “austerity” start to bite hard on the people, including for the first time in a long time, in historical terms, the well educated middle classes. The Government will have to decide who they side with. My friend told me that historically UK Governments have tended to make concessions to the people, when it comes to the crunch, which has avoided revolutions compared to other country’s histories. However, it requires a lot of intelligence to spot dangerous situations and make the right decisions!

  • Comment number 83.

    . At 15:07pm on 31st Jan 2011, moof_attack wrote:
    66. At 14:46pm on 31st Jan 2011, writingsonthewall wrote:
    management? - please tell me - who is managing capitalism?

    The players have played their part but the game is a lost one to begin with.

    -------------------------------------------------------------------------

    You'd hope it would be the politicians, but I'm not going to hold my breath on that one.
    They all appear to go to the same schools and universtities, and never do a job outside of politics.
    They're supposed to be the ones best placed to make the big decisions, and yet the vast majority of them don't appear to understand the difference between the deficit and the national debt.
    ..................
    Proof, WOTW, that more of the ‘intellectuals’ are refusing to believe the lies of the ‘acquisitor’ ruling elite and their sycophantic supporters.

  • Comment number 84.

    70. At 15:01pm on 31st Jan 2011, Jacques Cartier wrote:
    59. At 14:24pm on 31st Jan 2011, moof_attack wrote:

    > What utter rubbish - HBOS and NR went because no-one in the money markets would lend
    > to them.

    Technically true. We welcome simplification, but not obnoxious over-simplification. Please do some homework before making these one-sided, and wrong-headed statements. Why do you think no-one in the money markets would lend to them ?

    > The massive funding gap (with massive maturity mismatches) was built up
    > over a period when money was cheap, and lent mostly to corporates and individuals
    > (a lot trying to make a quick buck in property). Neither had investment banks....

    Next you'll be telling us that Lehmans and RBS were just a coincidence eh? Pull the other one – it's got bells on it! I'll help you out though - here's a tip for you. Sub-prime. Got it yet?"

    As usual Jacques Cartier you don't answer the relevant points made by this poster because you have no idea what you are talking about. Time and again you've been asked what your understanding of what different areas in banks actually do and you always fail to provide an answer. You participation here adds nothing.

  • Comment number 85.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 86.

    Robert you are right to focus on the problem of the mega banks.
    The problems of Tunisia and Egypt, although due largely to authoritarian governments, have been exacerbated by unemployment and falling standards of living in these two countries.
    So all is connected, and as you pointed out in your excellent documentary on the banking crisis, these banks are now bigger than the GDP of some countries. And I think you are trying to tell us that it is impossible for a consensus of G20 to change this situation.
    Is it not time for a brave Obama, a daring Cameron, a rogue Sarkozy, or a mischievous Merkel to dump the actual G20 meetings and go back to subtle UN diplomacy and stop mega banks from evolving into even larger entites. I do not think I ever want G20 meeting in UK,they have a feeling of CARBONWASTE about them, they stir up trouble in capital cities the leaders only agree on the most basic level. And as for Davos, well if participants ruled out any chaos in Egypt, I am not impressed by the perspicacity of the global banking community and useful output......I am not hopeful.

  • Comment number 87.

    Moof_attack, what kind of idiocy are you spouting?

    If retail and casino were split 5 or 6 years ago firstly there wouldn't have been a crisis because the scale of leverage in sub prime would have been much much less and "normal" fiscal/Central Bank activity could have prevented the interbank lending drying up.

    Secondly, Government interventions could have been limited to insuring deposits in the retail banks. The reason a financial crisis has turned into a World Wide depression (for "normal" folk at least) that is so deep, long lasting and painful is that Governemnts *needed* to save the savings of retail depositors or face rioting on the streets. Unfortunrly to do this they had to save also the giant casinos bolted on the side of our retail banks.

    We would not have had to bail out the whole financial system to the tune of £5trillion. If casiosn and normal banks had been seperated, interest rates would have remained normal and we wouldnt have any "sovereign debt crisis", stagflation, or excuses for enormous idelaogical attacks on the public sector.

    Not doing anything about this is very irresponsible of current Governments. We all know who caused the mess (hint: it had nothing to do with Gordon Brown), we know who has been utterly unaffected or ahs even benefited from the crisis despite causing it (investment bankers, hedge funds, bond vigilantes, pension funds, etc) and we know who is paying for it - anybody who isnt the global elite.

    There are several soltiuons we can pick
    1) Governments sticking with status quo until the people rise up and revolt
    2) Tobin transaction tax
    3) End of fractional reserve banking (e.g positive money)
    4) Splitting retail and Casino banks
    5) Set up Government run state bank
    6) Tax reforms including huge bonus tax, windfall tax on banks etc and progressive taxation, clamping down on tax evasion, avoidance and management

    People are trying to rewrite history at the moment. The problem is we can all feel it in our bones whats going on.

  • Comment number 88.

    "President Mubarak was left in little doubt that he is an isolated figure, who would be spurned by the global elite unless he listens to the voice of his people"
    ++++++++++++++++++++++++++++++++++++++
    Well if he does he will be ex-President Mubarak. Whether the "global elite", whoever they may be, will then want anything further to do with him is doubtful, so the qualification appears unnecessary.

  • Comment number 89.

    • 30. At 12:51pm on 31st Jan 2011, Gina Citroni wrote:
    Just because a thing is hard to do, doesnt mean we shouldnt do it!

    - Exactly! It took me 6 years to mould the Taj Mahal out of jelly but boy was it worth it!

  • Comment number 90.

    81. At 15:32pm on 31st Jan 2011, moof_attack wrote:

    "If so, HBOS & NR didn't have much, if any exposure to this, their exposure was not through investment in complex instruments.
    They lent badly, I don't need to simplify it because it really isn't complicated."

    What is complicated is the intricate interdependence of banks - and the reliance on each other to pay up. If one bank doesn't pay - then they all come crashing down.

    The failure of a single bank can easily bring the system down in the same way that a collapse of saver confidence can create a run on any individual bank.

    It's not strictly too big to fail - it's in too deep to back out. That's why Gormless Gordon saved the banks - not because he wanted to keep Lloyds and RBS afloat for nostalgic reasons...

    Fear stalks the world of finance - fear of the realisation that they're all depending on each other - it's the prisoners delimma as each bank follows the path it sees as the one to it's salvation - but this impacts on the chances of success of another...or eventually the entire system.

  • Comment number 91.

    OH. I tire of all this Sophistry. Money and Debt are power and their present use is stifling life out of the country and its people. I 'd like £500000 to invest in three fantastic new social enterprises - arts,music, dance, crafts and green conservation/construction skills to create useful and interesting employment for around thirty people, at present not so involved, creating infrastructures and inspiration for the use of many more folk.

    Frankly, I don't want the banks to lend me this money. I want them simply to invest it. They'll get returns, over the years, as more people are involved in an active and vibrant economy. There's got to be new capital injected directly into our society in order for it to blossom again. The present alternative cannot continue.

  • Comment number 92.

    All this user's posts have been removed.Why?

  • Comment number 93.

    Averagejoe- I hope your right but I dont think so this time. There will have to be a revolution, but luckily it looks like the people are up for it at the moment.

    The current Governement has 20 millionaires in its Cabinet; one third of the Conservative MPs are either currently or have been investment banksters and the Tories biggest donors are of course investment banking.


    http://www.havingtheircake.com/content/2_Our%20financial+industrial%20system/7_Government%20and%20politicians/Politicians%20and%20the%20finance%20industry.php

    They are conducting ideolgically based class warfare on everyone but the Global Elite who fund them.

    Hence driving up of unemployment to suppress wage demands, selling off and privatising everything in our public spaces (health, education, etc), shifting the tqax burden from rich to poor and lying about the scale and cause of the deficit to justify the attack on the people.

  • Comment number 94.

    Lies, damned lies and statistics....

    Lets have a look at this great news from Reed.
    "January sees rise in private sector job vacancies"

    http://www.bbc.co.uk/news/business-12311019

    Jolly good - there are the private sector jobs that George is looking for.

    However I had a little look on the Reed website for how these figures are collected.

    http://www.reed.co.uk/cms/start/articles/jobsIndex/about

    ....now there is no specific mention of how the data is gathered - other than 'from the Reed job boards'...and if you look on these boards you will see jobs advertised by many different agencies.

    ...anyone with experience will know 2 things
    1) There are a lot of duplicate jobs on there being advertised by different agencies, but undetectable as duplicates.
    2) A lot of the vacancies don't exist (anyone who knows this industry as I do know that many vacancies are merely 'possibilities' or managers desires - but the key for any agency is to have many people signed up in order to impress potential clients.)

    This was reported as a factual rise in private sector vacancies by the BBC (and others) when actually it's merely a press release from Reed which has very little scrutiny about the collection of data to make these claims.

    This is where you have to be careful folks - there are clearly many forces at work which are determined to deceive.

    You'll know when the private sector jobs are here - the queues at the Dole will go down and the GDP will start to grow again. Until then this is just fantasy from some ever increasingly desperate politically motivated stooges. What a shame the BBC has found itself 'taken in' yet again with it's press release arm.

  • Comment number 95.

    60. At 14:25pm on 31st Jan 2011, Amused2Death wrote:

    'One such fault-line was personal credit availability. I know about a half-dozen individuals who became credit card 'tarts' ; two of them openly admit to having lied significantly on their multiple application forms. I am sure that many of us know others who lied about their incomes on 'liar' loan mortgage applications.'

    -------------------------------------

    Was it not just the banks simply taking advantage of the dis-advantaged in society? (i.e the very old, the young and the not so bright)

    Is this morally right?

    Remember when all of the banks started laying off ALL of their highly experienced bank branch managers during the 'Great Period of Deregulation' and the bringing in of new CEO's with only retail experience and absolutely no banking qualifications whatsoever?

    All of these actions were implemented in order to get around what's called the "Originate and Hold" bank lending model (i.e. NO SECURITISATION)

    The banks purposefully set up sales call centres and were selling loans to anyone with a pulse.

    Would you offer a child you knew, say, a quid to buy sweets with, but tell them that they could only have the money as long as they pay you back 2 quid in 5 weeks time. Would you take advantage of that (dis-advantaged) person?
    People with low IQ's (i.e the cognitively challenged) are like children.

    Do you remember the case on Monty Slater?
    http://www.publications.parliament.uk/pa/cm200304/cmselect/cmtreasy/125/3101603.htm



  • Comment number 96.

    83. At 15:37pm on 31st Jan 2011, Averagejoe wrote:
    .
    Proof, WOTW, that more of the ‘intellectuals’ are refusing to believe the lies of the ‘acquisitor’ ruling elite and their sycophantic supporters.""

    Proof, WOTW, that you have a couple of sycophantic supporters, even though you continually post the same thing day after day after day.

  • Comment number 97.

    86. At 16:07pm on 31st Jan 2011, startsmall wrote:
    Robert you are right to focus on the problem of the mega banks.
    The problems of Tunisia and Egypt, although due largely to authoritarian governments, have been exacerbated by unemployment and falling standards of living in these two countries.
    So all is connected,
    .................
    Correct, but many of the sycophants will try to convince you that its a lack of democrasy to blame. But people will tend to put up with dictators as long as they have an adequate level of prosperity. I’m so pleased with the progress that is being made on this blog, the truth is creeping out from beneath the myths and lies.If governments either through their actions or lack of action destroy the prosperity of the people, the people will turn round and destroy their governments. It’s a story as old as the hills.

  • Comment number 98.

    #"35. At 13:01pm on 31st Jan 2011, Richard Richardson wrote:
    In my opinion banks have been punished enough these last few years. Government assistance has not been free, large portions of UK banks are owned by the state, banks shareholders have felt immense financial pain. Liquidity was the problem during the crisis, and now banks hold more capital. We have all felt pain and we have had some change for the better.

    It’s time to embrace the forthcoming growth in our financial services industry that will yet again generate massive injections of tax revenue for our country. Maybe it’s time to look at some potential return from our wrecked banking sector, rather than constantly kicking them while they are on the floor. The bank bashing has got to stop. I personally would like by share holding to recover from the depths of despair, this continued bashing is not helping.

    Stop it and let’s move on."
    ---------------------------------------------------------------------------------

    Man down!! Is there a doctor in the house?

    I like this bit best;

    "Maybe it’s time to look at some potential return from our wrecked banking sector, rather than constantly kicking them while they are on the floor"

    Can you write "potential", "wrecked" and "kicking them while they are on the floor" in the same sentence without questioning why they're getting a kicking?

    I've said it before and I'll say it again, we WILL NEVER see a return for the money ploughed into part acquiring banks.

    See you on 26th

  • Comment number 99.

    I can scare every banker with one word - "SPAIN."

  • Comment number 100.

    82. At 15:34pm on 31st Jan 2011, Averagejoe wrote:
    "We agreed that the dangerous point will be this autumn when the Banking Commission produce their findings/recommendation and the realities of “austerity” start to bite hard on the people, including for the first time in a long time, in historical terms, the well educated middle classes. The Government will have to decide who they side with."
    ----------------------------------------------------------------------------------

    It'll come before then unless governments keep shtum about how much they bail out banks in the summer after the "Buy one lose two free" sovereign bond sales.

    I can see a lot of caps in hands on the horizon.

 

Page 1 of 2

BBC iD

Sign in

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.