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Banking Commission wants firewall around retail banking

Robert Peston | 07:58 UK time, Saturday, 9 April 2011

The Independent Banking Commission will say that an internal firewall or protective barrier has to be put around the parts of a big or universal bank that are deemed to be vital to the interests of the economy (as I said on the Ten O'Clock News last night).

They are the parts of a universal bank such as Barclays, Royal Bank of Scotland and HSBC that would always be bailed out by taxpayers - and they include our savings, the mechanism for moving money around (what is known as the money transmission mechanism) and business lending operations.

The idea is to make sure that they could not be damaged as and when problems arise in other part of banks, such as the trading activities of banks.

However there are different ways of achieving this end - which would be more or less expensive for banks to implement.

Banks argue that the cheaper option would be to reinforce the operational separation of this kind of retail banking from their investment banks, with tighter legal separation into separate legal subsidiaries only occurring in a crisis, in a process called resolution.

In these circumstances there would be some increase in the costs of borrowing for banks - because it would be clear that taxpayers were no longer prepared to bail out everything they do in all circumstances, and therefore the risks of lending to banks would increase.

But because banks would retain the ability to deploy their capital across the range of their activities according to the returns they perceive to be available at any particular moment, the increase in their costs of doing business would not be - in their view - prohibitive.

The other option would be for the banks' investment banking and retail banking operations to be forced to operate in independently funded and independently capitalised subsidiaries in good times as well as bad.

The banks fear that this would force them to raise a lot more expensive capital for each of their new subsidiaries and would also lead to a far greater increase in their borrowing costs. They claim such a structural reform would put them at a disadvantage compared to their overseas competitors.

However this form of subsidiarisation is widely seen to be a far more robust way of reducing a substantial implicit taxpayer subsidy for investment banking - the parts of the bank that trade on financial markets and advise the biggest companies on how to raise money - and also of reducing the probability that taxpayers would be called on to bear the enormous financial liability of rescuing an entire universal bank that runs into difficulties.

My understanding is that the Commission will present the options and initiate a debate.

As for the Chancellor, George Osborne, he will welcome the analysis carried out by the Commission, but he will not throw his weight behind any particular proposal to reform the banks until after the Commission's final report is published in the autumn.

Comments

Page 1 of 2

  • Comment number 1.

    Surprised we haven't got this firewall already...

  • Comment number 2.

    This is excellent news and unlike George Osborne's awful "project Merlin" http://bit.ly/dNChDU and his lack of leadership in discussions with Europe on banking reform, this commission appears to be coming up with some excellent ideas. http://bit.ly/h9YW2X

    I think Mervyn King understands the need for these changes, but will George Osborne go for the commissions recommendations hook, line and sinker?

  • Comment number 3.

    Based on their track record the right thing to do is to find out what the banks want and do the opposite. Seriously though before any option is preferred it would be wise to think of the real situation likely to arise where there is a financial crisis and the subtleties of subsidiarisation v resolution will be lost on the majority of the banking user population who fearing a collapse will want their money out and safe asap. The real need is for the activities of the too-big-to-fail banks to be supervised not regulated and for the stability and security of the industry to be assured by retaining a substantial element of public ownership. Otherwise it will be just window dressing to save Osborne's and Cable's face.

  • Comment number 4.

    A long time ago I worked for GEC plc under the umbrella of the Group company at Stanhope Gate. We presented to the world as one large entity but in substance we were autonomous limited companies and separate legal entities gathered together under group control. This is an established way of protecting the whole from its parts. There was an inferred security doing business with the group companies. It is as applicable to banking as it is to electromechanical manufacture and if it puts up costs or forces proper caspitalisation this should be reflected in the selling price to the public. The banking fraternity has still not got its head around the cost of capital concept or valuing assets and loans appropriately. Go forward from a position of strength. Those doing day to day real world business will prefer the "security" of an entity that mitigates the risk to the saver and general business customer by re-organising in this fashion and they will pay for this operational security.

  • Comment number 5.

    Robert P. wrote

    "....Independent Banking Commission will say....."

    All of these leaks about what will and what will not be in a so far unpublished report are just a method of spinning what comes out. They are institutions seeking to protect and position themselves AGAINST the interests of the general public.

    Having said that I have no confidence in the Commission's work, not through any knowledge at all, but some slight understanding of how 'the system' works. Commissions are rather like 'Leak Enquiries' a method of kicking some unpleasant matter so far into the long grass that those in power whom we hold responsible for the safe functioning of the system hope the public will forget about the reason for the investigation in the first place - a long, slow and very expensive way to hide bad news!

  • Comment number 6.

    Politicians know that any anti-banker measures will get plenty of votes.

    So break 'em up, I say. Bob Diamond hates it, so it has to be a good thing.

  • Comment number 7.


    Sorry. This just is not good enough.

  • Comment number 8.

    > My understanding is that the Commission will present the options and initiate a debate.

    There's no need for debate - the public have decided to break them up to teach our greedy, fatcat, socially useless bankers a lesson. This commission just has to get on with it, and quit these delaying tactics.

    Remember: There is only a need for a firewall when the casinos are joined to the retail banks. But once broken up, there is no need for any firewall.

  • Comment number 9.

    Would it be fair to say that the banks don't accept that they were at fault for the financial collapse and therefore don't see why they should have to change their practices?

  • Comment number 10.

    @ 9. At 09:02am 9th Apr 2011, Nick wrote:

    > Would it be fair to say that the banks don't accept that they were at fault for the
    > financial collapse and therefore don't see why they should have to change their
    > practices?

    Yes - all other Britons consider joined casion/retail banks to be a large threat to Britain, so they have to be seperated. That's the bottom line.

    But almost as important is the question of competition. We've been gouged by these greedy, useless pariahs for a long time now, and it's time to make them work hard for every single penny of profit.

    If they say they'll move abroad, then make them leave immediately - British people must never give in to blackmail.

  • Comment number 11.

    The very fact that the banks seem to not want to be split into Retail/Casino sections suggests to me that it is the best solution.

    At the end of the day, it would be much better for the consumer (and business customer) for each Retail bank to be able to offer a range of services to those customers that require Casino operations a range of independent offerings.

    A "different bank" delimitation would signal clearly to EVERYONE where the different risk factors were. The reason we get bubbles and busts in the first place is that the risk is obfuscated for the consumer.

  • Comment number 12.

    So the 'universal bank' plan is to create a kind of Mount Olympus for the banks... when they choose to send a thunderbolt to any part of the world, that region must cower and obey etc?

    We truly are letting money become our master. People like Robert Peston and Gavin Hewitt will mull on who's doing what on Olympus, which bank god or goddess has been offended by another and the ramifications for the world (as these divine beings quaff wine and scoff nectar).

    Can I get a job at the universal bank? Sounds like a splendid gravy train.

  • Comment number 13.

    Why have the commision chosen splitting investment / retail banking as a topic, they appear to be trying to solve a problem that does not exist. Would this have made an difference to:

    Northern Rock - Nope
    B & B - Nope
    HBOS - Nope
    A & L - Nope
    RBS - who knows (they would have been bust anyway)
    Barclays - this would cause the problem as the profits from investment banking have subsidised the retail loan book.

    Politicians should be kept out of regulations - they dont know what they are doing

  • Comment number 14.

    Interesting dilemma for bankers if Barclays or any of the others decide to leave UK: what would their credit analysts predict for gilt spreads? Embarrassing if it's a narrowing

  • Comment number 15.

    This is probably the best way to keep the gamblers away from the biscuit tin. Once they lose the money they have, that's it. A bit like old Captain Bob Maxwell with his casino problem, once he lost his own money, he raided his employees pension fund. If gambling is a persons problem, cut off the supply of what they need to feed it.....money.

  • Comment number 16.

    Retail Banking, that's not a real Bank that's a franchise. A real Bank is not regulated or subject to government control and can charge the investors anything it likes and there is not a thing you can say or do about it.

  • Comment number 17.

    okeen - Thats because B&B and A&L according to FSA were to small to survive. Northern Rock - was an exceptional case down to a poor business model - and a few leaks that panicked customers and caused the run that took it down.

    At the time people were moving money to Ireland because it was perceived to be safer - which caused further disruption - which was down to media.

    Of course if banks move out of London, one might predict a mass sale of London property, loss of income to the nation, with no thought about the consequence.

    Have we not lost sight of the fact that B&B lost millions because of mortgage fraud, the public borrowed too much, the ratings agencies over-valued sub-prime debt with the US wrapping up the toxic debt and passing it on to the world banking system.

    What is needed is a more stable financial system - and to ensure stability one needs to take out the cause of instability, which is high leverage and the ability to 'bet for and against' with borrowed goods.





  • Comment number 18.

    Leave the rogue banks to sort out their own problems and open the door for good old fashioned trusted banks who do only traditional banking...e.g. the mutual building societies or like the old Trustee Savings Bank before it was gobbled up.
    This would give the customer (us) the choice to switch our accounts to the more traditional and safer banks.
    Where does that leave the rogue banks?...Unfortunately the Government has supplied these rogue banks with loads of (our) money and is now entrapped by them....No easy solution here.
    Only Joe Public can sort this out by switching and moving their money away from rogue banks....But how do we know which are the rogues...That is the problem because it is not very clear which banks are not to be trusted with our money...
    There should be bench marks or KITE MARKS for banks.

  • Comment number 19.

    The problem our whole understanding of the banking crisis and its solution has been one of incorrect models. From Paul Krugman blog, April 18, 2010, 'Six Doctrines in Search of a Policy Regime':

    "Shadows: I’m very much a Diamond-Dybvig guy – that is, I think of financial crises in terms of the Diamond-Dybvig model of bank runs. The basic idea is that what banks do – what makes them useful – is the way they let investors satisfy their desire for liquid, short-term assets while using most of those investor funds to finance illiquid, long-term projects. The key is the law of large numbers, which lets banks keep only a fraction of deposits in liquid form.
    The problem, as Diamond and Dybvig pointed out, is that such institutions are vulnerable to runs: if something leads investors to fear for the soundness of a bank, they will all try to withdraw their funds – and in so doing can break even a fundamentally solvent institution. The solution, said D&D, was deposit insurance. Of course, this leads to possible problems of moral hazard, so deposit insurance has to be further supported with bank regulation.
    All of this, however, failed to take account of shadow banking – the rise of institutions that were banks in the Diamond-Dybvig sense, engaging in liquidity and maturity transformation, but weren’t classified as banks for regulatory purposes. Hyman Minsky, by the way, saw this coming: he wrote at some length about the rise of what he called “fringe banking”, by which he meant essentially the same thing Paul McCulley of Pimco meant when he coined the phrase shadow banking. And so we recreated the vulnerabilities of the pre-1930s banking system.
    Now here’s the thing: there’s nothing in this story about too big to fail. Indeed, the banks in the Diamond-Dybvig paper are atomistic. And it’s worth remembering both that Lehman wasn’t all that big and that the great banking collapse of 1930-31 began at a Bronx-based bank that was only the 28th-ranked bank in America."

  • Comment number 20.

    "9. At 09:02am 9th Apr 2011, Nick wrote:
    Would it be fair to say that the banks don't accept that they were at fault for the financial collapse and therefore don't see why they should have to change their practices?"

    They weren't. Blame the Americans and their mortgage brokers, and the US gov for Fanny and Freddie.

  • Comment number 21.

    So the banks option is to continue as we are, but when the next crisis happens we then step in to ring fence the retail arm from the investment arm.

    Short term greedy thinking again !

    By the time of the next crisis, the people at the banks who cause it will already have had their millions in bonuses and will walk away scot free. They won't care about the consequences, and are just thinking of the effect the IBC's option will have on their ability to make money really quickly.

    Also, I don't think the world could sustain another banking crisis without the whole financial system collapsing.

    As has already been said, whatever banks propose, do the opposite.

  • Comment number 22.

    Underwriting infrastructure is necessary. Investment banking is not infrastructure. The BoE position that without taxpayer backing UK investment banks makes no profit should be of serious concern. We taxpayers are the capital at risk but get no share of the profit.
    So we should reconsider the position. Our capital is at risk so it's our profit. A 90% tax on all returns before wages, bonuses, dividends, etc is appropriate.
    I don't like our nation being a giant hedge fund, but if that's the call then lets make proper money from it.

  • Comment number 23.

    Okeen and Dr Bob are bang on, I guess we just needed a scapegoat for our own profligacies so we pick on the UK banks.

    Truth is a lot of people borrowed too much with no thought for what might go wrong. Sure the banks were culpable to an extent in not restricting lending but if there had been no irresponsible demand.......

    Bottom line is that we are all to blame but will not take responsibility.

  • Comment number 24.

    Does that mean a one way firewall allowing UK capital to leech out internationally for exploitation of the global vulnerable and other nasty SOFOMT (some other form of money trader) spivving?

  • Comment number 25.

    20. At 10:27am 9th Apr 2011, doctor bob wrote:
    13. At 09:22am 9th Apr 2011, okeen wrote:

    Look, the whole system was tightly coupled and collapsing. Please try to look at the big picure.

    We are going to decouple the banks, and let the casinos fail, come hell or high water. Stop complaining about it and get with the program.

  • Comment number 26.

    I hope that the recommendations are to split them up. When it suits we are told that boring retail banking is very different from exciting investment banking, but exciting investment banking only seems possible if backstopped by boring retail deposits. And as a customer of a boring retail bank product exactly what benefit do i get from allowing them using my money to underpin all this other profit generating activity.... I certainly don't see it in any interest I'm getting!!

    If exciting and risky investment banking is as valuable and profitable as its made out, then there should be no shortage of means to finance it from sources other than the taxpayer or retail deposits.

    Make it an entirely separate activity and make it fully exposed to commercial and market risk. I'm sure we'll soon see how quickly the profits fall as the taxpayer / depositor safety net is withdrawn!!

  • Comment number 27.

    Interesting to note that while the banks which will be impacted by this report will not receive a copy until 07.00 on Monday (when the findings are announced) Robert Peston appears to have seen it or has been informed of its contents already. I wonder if that is in any way connected with the fact that HM Treasury received its copy at 17.00 on Friday.

  • Comment number 28.

    I've blamed fannie for a lot over the years

  • Comment number 29.

    Ring-fencing will not work!

    The 'banks' do not want the retail and 'investment operations' to be split ... as doing so would require them to show movements of capital ... somewhere in their accounts and be more accountable as a result.

    Whilever the banks can sleaze ad infinitum within their loathesome international sprawling corporate structures ... there will never be transparency and accountability ... and we we will back here bailing them out again before too long ... and Britain will always lose out regarding the amount of capital that could have been applied to the British economy (as an opportunity cost issue) instead of being thrown at every globalised business most able tax dodger that the nasty greedy SOFOMTs can find.

    Reform should also means that the 'banks' pay more tax in the UK as now paying around 10% of UK tax revenue but actively controlling and gambling on around 80% + of real UK money.

    None of the big 'banks' are real UK 'banks' anymore - their corporate structure has been cleverly assembled over many years to be as 'tax dodge efficient' as possible and as internationally flexible as possible. Some of the biggest bonuses paid in 'banks' go to those who enable their tax avoidance and tax haven arrangements.

    I suspect a nasty fudge coming here from the Commission ... just look at who is on the Commission - can anyone say that any of its members are really looking out for the interests of Joe Public on this ... the level of bias is colossal even if these members are more moderate in their outlook?

    Well, someone has to say this stuff! We can't leave it all to Jacques Cartier.

  • Comment number 30.

    I would break the banks up and then pull all investment banking bits into a single company which is 60% owned by the taxpayer.

    Then I would use that new investment bank to do some real investment in broadening and rebalancing the economy by creating new companies and investing properly and for the long term in others.

  • Comment number 31.

    Another question is why did Britian pay the full price of bailing out the big banks when they are internationalised ... The cost of doing so should surely have been spread amonst the jurisdictions where the banks avoid/pay taxes?

  • Comment number 32.

    >>They are the parts of a universal bank such as Barclays, Royal Bank of Scotland and HSBC that would always be bailed out by taxpayers - and they include our savings, the mechanism for moving money around (what is known as the money transmission mechanism) and business lending operations.

    Hello ?? Since when had Barclays and HSBC been "bailed out" by taxpayers ?? Northern Rock, yes; RBS, yes; HBOS, yes; the other two, NO !!

    That said, the banks who survived the financial debacle WERE the ones who kept their investment banking operations seperate from their commercial operations !! It's the cowboys and risk-takers at NR, RBS and HBOS who tried to be too clever and ended up needing the taxpayers to bail them out.

    Casino banking should *ALWAYS* be kept seperate from commercial banking, preferable with arms-length transactions !! All this is a bit late but still better than never !!

  • Comment number 33.

    #30 >>I would break the banks up and then pull all investment banking bits into a single company which is 60% owned by the taxpayer.

    And just where will you get the funds to "pull all the investment banking bits into a single company" ?? Or are you going to do a Mugabe and simply nationalise everything without recompense ?? That should do Britain's credit rating no end of good !!

  • Comment number 34.

    "Surprised we haven't got this firewall already..."

    We did have. In the Thatcher era, the banksters asked her to get rid of it, so she did, as part of her "big bang" programme of light touch regulation, a programe which Blue Labour were later happy to continue.

    The Yanks had something similar too. Their requirement to separate retail banking from casino banking was introduced in the days around the Depression; it was the Glass Steagall act of 1933. The US government were asked by the banksters to get rid of it, and so in 1999 it went.

    The rest is (as they say) history, and the honest working (or studying, or retired, or...) public in the UK and the US (and Ireland, and...) will be paying for it for decades.

    But remember, we're all in this together.

  • Comment number 35.

    "Since when had Barclays and HSBC been "bailed out" by taxpayers ?? "

    Barclays had to run to sugar daddies in the Middle East for their bailout. Barclays position as market-leading consultants on highly profitable UK tax-dodging schemes might have looked a bit fragile if they'd suddenly been explicitly dependent on UK taxpayer funding for their survival.

    HSBC (and others) may not have taken taxpayer funds directly but they would not have survived in their current form if the bankrupt banks had been allowed to fail (which of course would have been the sensible thing to do).

    The same investment protection schemes as exist today would have ensured that the retail investments of ordinary working people were protected. The ones who would have lost out are the likes of those now in the Millionaires Cabinet.

  • Comment number 36.

    There is, and will be, a big noise about the increased cost of lending to BarCap, HSBC etc for their investment banking operations.

    However this ringfencing should place them on the same footing as "proper" investment banks and more direct comparisons of performance will be possible. Retail deposits have been used to hold governments to ransom and slant the table in the favour of these banks for so long so its now time they stood on their own 2 feet

  • Comment number 37.

    The banks should not have any protection, But the directors of the useless failed banks should , lose all they property assets' and private money min 2 years jail each , and be made homeless and hungry.{ Just like the people they made this happen too} The banks who did not fall into the easy morgage trap?{Scam} should pay extra windfall tax on they profits to bail out they greedy failed bankers friends but they should get no extra bonus, but all money given to homeless charitys.

  • Comment number 38.

    Break 'em up!
    There will be no recovery until we get the insane greedy parasites off our backs.
    ---
    PS Hope the Icelanders vote no in the referendum. People who put money into Icebank etc were stupid. Tough.

  • Comment number 39.

    The fact that the banks themselves don't like one of the solutions should not be a good reason either for or against the correct one being implemented.

    If we ask the question why we are doing this, then the answer has to be because the banks lent money recklessly and with utter disregard for the 'lender of last resort', namely the taxpayers. If we continue to back their investment banking operations without proper safeguards to keep us from taking on their risk then we deserve everything we get, and in time we will get another banking crash.

    The only logical answer is to split out the parts of the banking operations which affect the day to day functioning of the economy, retail and commercial banking, and to make the investment banks run separately. Yes their capital will cost more which they will then price into their products without any problem whatsoever. The profits and bonuses will be roughly the same, they will get to work without the same government interference and we get to live in an economy without the banking time bomb underneath it. Not difficult when you think about it.

  • Comment number 40.

    Subsidiarisation or resolution, that appears to be the question. The regulators want the former, and the banks the latter. Who wins largely depends on who has the most representation on Cameron's £50,000 inner circle of lobbyists and whether any in the cabinet are prepared to listen to Vince. Not likely after he was torpedoed by the right leaning media. So, ultimately the banks will get their way allbeit with the lesser of their two 'evils'.

  • Comment number 41.

    #33

    Funds? Why would I need funds to buy something that I effectivally already own. I could do it tomorrow with RBS and Lloyds/HBOS and although they all deny it we know full well that Barclays etc have also had access to oodles of cheap taxpayers money through QE etc.

    So I'd just do it and to hell with them because I know and every person in the UK with half a brain knows that left to their own devices these banks will not operate their businesses in support of UK Plc, they will not provide risk equity for start-ups, early stage companies etc and will continue to prop up hedge funds and private equity companies neither of which create much that's new. They are greedy, unpatriotic, short termist, visionless and have no concept of what a real economy has to do.

    And yes I would do it with no recompense to shareholders because those shareholders - and especially the big City fund manager types - have to share the blame for the UK's deindustrialisation and the narrowing of the economy just as much as have all Govts for the past 30 plus years.

    As to our credit rating then I think intelligent countries would actually recognise this as a very sensible move and much more likely to pay dividends in terms of bolstering the UK economy than this ridiculous idea of simply putting up firewalls whiich of course won't work.

    The point is that as a nation we need to stop pussyfooting around with these people. They've ignored the will of the people on bonuses and they are still failing to support SMEs. Why the heck should we continue to tolerate this. I'm sick and tired of listening to banking apologists. They've had their chance and they've failed to live up to their promises. We now need to go for their throats.

  • Comment number 42.

    @5. John_from_Hendon:

    For someone who continually beats a drum for his own preferred (which he gives us to understand must necessarily be the only) one-track solution to all our ills to disparage in this contemptuous fashion all and any attempts to promote systemic reform, whilst at the same time proclaiming complete ignorance, seems to me to be a bit rich.

    It's just copping-out, and doesn't say much for the soundness of your judgment in other respects IMO.

  • Comment number 43.

    "The banks fear that this would force them to raise a lot more expensive capital for each of their new subsidiaries and would also lead to a far greater increase in their borrowing costs. They claim such a structural reform would put them at a disadvantage compared to their overseas competitors."

    You could rewrite this as the banks would have to raise capital at a rate that reflects the risks involved. I don't have a problem with that, after all that's what they do to Joe Public when they ask for a loan. What they have at the present is a massive subsidy because they can raise money on the basis of a secure backstop, the taxpayer.

  • Comment number 44.

    @19. ntp3:

    Are you paid (by the word) for continually regurgitating Krugman's blog here?

    Or are you just a worshipper?

    If we want ot read Krugman's blog we can do that for ourselves. Why is the BBC allowing itself to be used by you to carry Krugman's blog secondhand? I don't understand why the moderators pass this stuff.

  • Comment number 45.

    @29. nautonier wrote:

    "I suspect a nasty fudge coming here from the Commission ... just look at who is on the Commission - can anyone say that any of its members are really looking out for the interests of Joe Public on this ... the level of bias is colossal even if these members are more moderate in their outlook?"

    So your considered reaction when an important reform is canvassed is to throw doubt on the credentials and the probity of those who propose it?

    There's no pleasing some people.

    Seems a funny way to carry on to me.

  • Comment number 46.

    #23 "Sure the banks were culpable to an extent in not restricting lending but if there had been no irresponsible demand......."

    "Bottom line is that we are all to blame but will not take responsibility."

    Its the lender's responsibility to decide who and how much they lend. If you went to a bank 20 years ago with an unreasonable proposal they would turn it down, so what went wrong in the past 10 years? So I disagree with you entirely! Either bankers were incompetent and couldn't work out who to actually lend to, or they just didn't care.

  • Comment number 47.

    13**

    You are so wrong , it all started with CDO's and our banks were as guilty as the USA banks in supporting this type of investment.

    The issue is banks using the tax payer as an "Insurance" for paying their bills when the market goes against them. The cost of this "Insurance" is a £100 billion a year .

    My own view is Firewalls are not robust enough, we need physical break ups to ensure the risk takers are suitably controlled.

    Remember Robert Maxwell , firewalls didn't stop him and I suspect firewalls would not of stopped "Fred the Shred" at RBS , sometimes individuals become bigger than the company structure and subordinates are forced into the wrong decisions.

  • Comment number 48.

    45. At 15:32pm 9th Apr 2011, torpare wrote:

    @29. nautonier wrote:

    "I suspect a nasty fudge coming here from the Commission ... just look at who is on the Commission - can anyone say that any of its members are really looking out for the interests of Joe Public on this ... the level of bias is colossal even if these members are more moderate in their outlook?"

    So your considered reaction when an important reform is canvassed is to throw doubt on the credentials and the probity of those who propose it?

    ...........................

    Yes ... I'm not so naive to think that what what the Commission would appear to have leaked, so far, about what they intend to 'propose' ... sounds like anything other than a fudge ... that will be likely to preserve the status quo.

  • Comment number 49.

    35**

    If that is the case , David Cameron should stand up in the Commons on Monday morning and state. "As of today the UK government will only protect retail deposits to £50,000 each and no further funds will be paid for ANY bank bailouts, they will be allowed to fail".

    Watch the share value of the big 4 drop by 50% , then tell me that the banks are not protected by "Implied" tax payer backing.

    You are either naive or a bank "PR" blogger. I think the latter..

  • Comment number 50.

    "The Independent Banking Commission will say that an internal firewall or protective barrier has to be put around the parts of a big or universal bank that are deemed to be vital to the interests of the economy...

    They are the parts of a universal bank...that would always be bailed out by taxpayers - and they include our savings, the mechanism for moving money around (what is known as the money transmission mechanism) and business lending operations.

    The idea is to make sure that they could not be damaged as and when problems arise in other part of banks, such as the trading activities of banks".

    There's something screwy here (but maybe the Interim Report will make it clearer?). Where is there a clear dividing-line between "the trading activities of banks" and things like business lending? Isn't business lending a trading activity of a bank? It seems to me that a segregation of the banks' operations on this basis could never be satisfactory, and hence not watertight. And why would business lending (ie the lending of money by banks to privately-owned businesses) "always need to be bailed out by taxpayers"? How could "bailing them out" be appropriate for a debtor - they would be debtors of the banks (the same as mortgagees).

    We'll have to wait and see what the Commission is actually saying.

  • Comment number 51.

    #38

    Have I got this wrong then?
    My understanding was that your alleged "stupid people" already have their money back and its really us stupid tax payers who are at risk.
    Yes /No ????

  • Comment number 52.

    Whilst it is essential to separate the "casino" part of the banks from their essential deposit taking & lending divisions, that would not have prevented the recent crisis.
    When banks lend money to business & public they in affect create money (broad money) in the economy, this forces up asset prices (house prices), and can lead to inflation in the general economy (not good). Usually this leads to the Bank of England raising interest rates often causing a recession to slow things down (not good).
    However during the crash, liquidity in the banking system dried up, banks suddenly stopped lending (stopped creating money), so asset (house prices) fell & business failures & unemployment rose. The bank of England or the Government also needs to control the banks lending (money creation) to avert another crisis which may next time sink us.

  • Comment number 53.

    @48. nautonier wrote:

    "Yes ... I'm not so naive to think that what what the Commission would appear to have leaked, so far, about what they intend to 'propose' ... sounds like anything other than a fudge ... that will be likely to preserve the status quo".

    Fine, if you're content to conduct what purports to be intelligent debate on a basis of dark suspicions of everybody else's motives, not to say conspiracy theory, as opposed to reasoned analysis and argument.

    In no way can what RP is leaking about what the report will say be described as likely to preserve the status quo - if it were to be implemented. This government may, of course, at the end of the day decide to preserve it but if they do it won't be because the Commission has fudged the issue. The Commission is saying that it thinks investment banking abd retail banking should be segregated.

  • Comment number 54.

    So basically the main reason the banks make so much money and their staff are entitled to massive bonuses is that instead of paying commercial rates for the money they use, they basically get their money cheap by only paying the general public low rates of interest.

    It will be interesting to see whether they end up paying the true commercial rates of interest to borrow money that the banks charge their external customers.

    The public through Government needs to wake up to the fact that as depositors we are lending our money to the banks and we should be getting commercial rates of interest instead of being ripped off by the banks.

    If Banks were split which should be the preferred route then the public could choose to lend to the retails (safer banks) for lower rates of interest as basically this money would in the main be used to fund Mortgages and other relatively safe lending.

    Alternatively they could choose to lend their money to the riskier Banks who get involved with the riskier financial markets.

    So why is this unfair to the Banks?

    Simply because they won't be able to take our money and not pay a fair rate of interest to line their own pockets.

    Poor Banks

  • Comment number 55.

    why oh why, are we allowing the banks any comments at all. lets have it right, they cannot be trusted. they have taken the tax payes money, not lent how they should have. filled up there balance sheets with cheap cash from the BOE and the tax payers and paid themselves huge bouses. and then pay no tax for the next 3 years becauses of the losses they made. so in other words contribute nothing back to the ecomany. the solution. lend them no mre money, let them fail, use the post office for joe average to bank. and hold them responsible for crimes against humanity, what they have done is criminal. the elderly will die as a result of the inflation in prices due to the SPIVS AND GAMBLERS IN THE CITY.
    THE SOONER PEOPLE GET RID OF THE GUTLESS GOVERMENT AS THEY ONLY TALK AND DO NOTHING THE BETTER.

    SOLUTION.
    ALL PERSONNAL DEPT WRITTEN OFF, MORGAGES REDUCES BY HALF, AND TAX ON PETROL HALVED.
    ANYONE INVESTING IN MANUFACTURING INTREST FREE LOANS.
    NO BANK PROFITS TILL FULL REPAYMENT OF THE DAMANGE TO THE ECOMANY IS PAID BACK.
    SIMPLE

  • Comment number 56.

    Very simple solution...

    If you don't like a bank, then remove your account ASAP.

    No griping...JUST DO IT.

  • Comment number 57.

    I do wish people would stop blaming the banks...

    If you look at the problems in America with their mortgages etc and in Britain it was plain and simple.

    Succesive Labour government kept insisting that 'prudent' policies were the reason for the prosperity that people enjoyed - holidays each year, new cars, tellys - wide screen, high definition etc, move every two to three years - because you can get a mortgage on even wide ratios. The reality was that succesive Labour governments encourage the lending on every increasing ratios, there was no warnings to the banks about the dangers, the banks are businesses, there to make money! No warnings to the public about borrowing too much, it HAS to paid back sometime, I know people who thought nothing of remortgaging to go on holidays, pay for tv's, buy succesive bigger houses, with not a thought on the impact it has on their disposable incomes. Then when money became tight, people found they couldn't afford the repayments on their loans, started to bail out of their loans, the banks start too panic so insist on early repayments of some loans and the downward spiral starts. Gordon Brown as Chacellor during all this time needed to have an overview of the lending market, which he did, the amounts being borrowed and remortgaged, which he did, and this should have flashed danger signals up for him. But no, he wanted the illusion of growth and properity to enable his Governments reelection so he kept ignoring a problem that was being flashed up to him. When people start to remember the old adage 'only borrow what you can afford to pay back', then the financial circle will be closed. I'm afraid the greed and avarice of individuals overseen by a greedy and selfish Government led to the recession we are having now. Just as in your household budget, if the cash free at the end of each month is decreasing, then you have to cut back, get by on the basics, then when you have paid off your debts as quickly as possible so as not to pay more interest than you have to, then you can enjoy a few more luxuries than you did during the tough times. The trick is not to get carried away by the 'extra' money you now find yourself with. Housekeeping rules for us and our country.

  • Comment number 58.

    53. At 16:17pm 9th Apr 2011, torpare wrote:
    .....................

    'The Commission is saying that it thinks investment banking abd retail banking should be segregated.'

    .....................

    You're confirming what I'm saying ... surely the Commission should and ought to do more than present options ... it should have a preferred option and evaluate all of the options and make a recommendation on a single option with full reasons and analysis ... albeit within its limited terms of reference.

    I think that some of us have a feeling what is 'likely to be preferred' ... having not having been born sometime last week.

  • Comment number 59.

    46. At 15:40pm 9th Apr 2011, Pete wrote:

    Its the lender's responsibility to decide who and how much they lend. If you went to a bank 20 years ago with an unreasonable proposal they would turn it down, so what went wrong in the past 10 years? So I disagree with you entirely! Either bankers were incompetent and couldn't work out who to actually lend to, or they just didn't care.

    .....................

    They didn't care, because credit default swaps would pay out if a lender defaulted. The heads I win, tails you lose mentality that led to even more and more risk taking because so called financial experts thought they had created a no lose bet.

  • Comment number 60.

    #57 moaned

    "I do wish people would stop blaming the banks...

    If you look at the problems in America with their mortgages etc and in Britain it was plain and simple."

    Oh for heaven's sake grow up. For decades now the banks - being at the centre of all City type activity - have encouraged imports not manufacturing, lent money to overseas buyers of UK businesses as well providing loans to the utterly utterly useless and industry destroying private equity companies and hedge funds.

    They are of no benefit to UK plc at all. Their attitude and their "me me" strategies are one of the main reasons we can no longer wash our faces when it comes to real industry.

    BREAK THEM UP!

  • Comment number 61.

    Robert

    I will accept an internal firewall as a provisional measure prior to a formal, total, absolute divorce between retail banking and the so-called investment banks. That is the only basis for going forward.

    If the banks resist this measure which protects the real economy and creates the opportunity for a wider development of real economic activity in our country, then they have to be told quite simply and clearly that such resistance will be deemed an act of economic war against the people of the United Kingdom, or treason as it is known.

    This issue has to be stated baldly, with optimum prejudice for the simple reason that we, the taxpaying nation cannot accept what has happened, cannot accept the liabilities we have been forced into and do not believe that the banking sector as currently constituted can act in any other way than in their own sectarian interests. They will wail, gnash their teeth and threaten the end of the world.

    Well, if the world has to end then I would rather be on my feet than on my knees.

    I could elaborate on that last sentence but in the interests of public decency I have refrained.

  • Comment number 62.

    Was thinking about taking all my pension contributions out and putting them under the mattress. Apparently, all my contributions have 'disappeared' even under the FSA regulations. Naturally, we all know that pension schemes lock you in with lots of c**p small print. However, what we never expect is legalised and fraudulent loopholes from those who legally take your pension contributions - yet legally lose them with no redress?

    Thinking about a pension under the current UK protection - forget it.

  • Comment number 63.

    @58. nautonier wrote:

    "You're confirming what I'm saying ..."

    No, I'm contradicting you.

    ".. surely the Commission should and ought to do more than present options ... it should have a preferred option and evaluate all of the options and make a recommendation on a single option with full reasons and analysis ... albeit within its limited terms of reference".

    You seem to be ignoring the fact that the subject of this blog is an *interim* report, not the final one.

    The Commission is charged with making recommendations, but its timetable doesn't require it to reach those until the Autumn. Meanwhile, it is floating some preliminary ideas.

    "I think that some of us have a feeling what is 'likely to be preferred'"

    Would you care to be more specific, and also perhaps say why you believe you're endowed with special insight into the Commission's thinking? Just so we can have something to go on.

  • Comment number 64.

    Good grief but there's a lot of rubbish on this blog today.

    How many people who stubbornly insist that breaking up universal banks is the only possible solution honestly understand where and how you draw the line between retail and 'casino' banking activities?

    Is the fund-matching that allows a bank to offer a fixed term mortgage retail or casino? And if a company is selling goods to France and needs to protect margins through forward exchange rate option is that retail or casino? Because I think you will find whichever these are they are important to a smooth running economy. And just saying very simplistically that one can fail and the other should be rescued is hopelessly naive.

  • Comment number 65.

    jacques Cartier is wonderfully entertaining as ever.

    'We are going to decouple the banks, and let the casinos fail, come hell or high water. Stop complaining about it and get with the program.'

    Which programme is that, Jacques. Is it just yours? And why should we all get with it? Why are others not allowed their own independent views?

    If there's one thing I dislike more than greedy bankers it's being told that I have no choice but to sign up unthinkingly to somebody else's agenda. I've seen no evidence Jacques that you have any great understanding of economics or risk at all. Just a bit of prejudice against a sector of the economy that you happen not to be party of.

    But your posts are often funny.

  • Comment number 66.

    Lets get one thing straight, every single bank got bailed out. Directly or indirectly.

  • Comment number 67.

    There is only really one scenario to consider.

    If "Big Bank" goes bust (Lehman style), where is the money that belongs to the retail depositors? If "Big Bank" hasn't got the funds, then paying off retail depositors falls on the taxpayer.

    So it seems obvious then that anything that fails to protect against exactly this situation is not good enough. Your second option is sounding like what is required.

    No ammount of regulation, firewall, procedures and operational seperation protect you when the retail depositors cash is "somewhere else".

  • Comment number 68.

    63. At 20:54pm 9th Apr 2011, torpare wrote:

    @58. nautonier wrote:

    "You're confirming what I'm saying ..."

    No, I'm contradicting you.

    ".. surely the Commission should and ought to do more than present options ... it should have a preferred option and evaluate all of the options and make a recommendation on a single option with full reasons and analysis ... albeit within its limited terms of reference".

    You seem to be ignoring the fact that the subject of this blog is an *interim* report, not the final one
    .............................
    A) No ... I just don't think that anyone should get excited over the prospect of the Report and think that the weak terms of reference for the Commission will deliver any more than a fudge

    The Commission is charged with making recommendations, but its timetable doesn't require it to reach those until the Autumn. Meanwhile, it is floating some preliminary ideas.

    "I think that some of us have a feeling what is 'likely to be preferred'"

    Would you care to be more specific, and also perhaps say why you believe you're endowed with special insight into the Commission's thinking? Just so we can have something to go on.

    A) The devil will be in the detail and anything less than splitting the banks properly between retail and SOFOMT (some other form of money trader) ... physically, legally, structurally ... IMO, will probably not deliver the necessary reforms and prevent the tax dodging, leeching and slippery transfer of capital out of the UK by non-transparent accounting systems for gambling and spivving. The problem at this point is the term 'ring fencing' (which is a term I started using on here about 3 years ago with regard to saving deposits) ... which is a nefarious and vague term in context and has become substantially over-used.
    ........................
    See also:

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/04/ring_fencing_banking.html
    'MPs back 'ring fencing' of retail and investment banking'

    'Which is the last thing the banks themselves want to hear. They are bitterly opposed to the idea of putting their investment and retail arms in separately capitalised subsidiaries, fearing that would lead to a massive increase in their costs.
    However the statement by the MPs that they are "encouraged by signs that the Independent Banking Commission is already considering ring fencing as a possible solution" rather implies the mega banks may have already lost what they would see as the most important part of the argument about their future.'
    ....................
    We'll have to wait and see; but ring fencing for 'banks' which are too big to fail or save is not looking at issues like e.g. optimum size for UK based banks and whether the banks are simply too big and e.g. rights and privileges and e.g. competition issues and e.g. redfinition of a bank ... and mutuals and building societies etc

    In other words, it sounds like that there is already a preliminary consensus about 'ring fencing' ... and this at the interim reporting stage gives me the impression that the remit of the Commission is too narrow and that the preliminary findings are premature and reflect the narrow and incomplete terms of reference.

    No need to reply ... we'll have to wait and see! The 'devil will be in the detail.'

    It might be better if the Commission make it clear what they are and are not looking at ... and I think that if this is done, this will raise more than just a few eye-brows!

  • Comment number 69.

    # 66. Mammon1 wrote:

    "Lets get one thing straight, every single bank got bailed out. Directly or indirectly."

    Exactly - so lets take them over.

  • Comment number 70.

    Is this the same type of firewall that was supposed to protect and separate pension money from company money? We all remember how highly effective that firewall was in Robert Maxwell`s companies.
    Dipping in to his pensioners fund to purchase companies and then working the same Ponzi scam on his new employees. Its the same with banks all those wage transfers, savings deposits etc is siphoned off and used as interest free cash for much risker investments. As we all know they gamble with ordinary peoples money, if they want to gamble they should borrow on a loan like everybody else has to borrow.No wonder the bankers do not want the two types of operations splitting its free/cheap money.

  • Comment number 71.

    I remember seeing an interview with Alistair Darling a while after the bail out of parts of the banking system where he said that there was a risk of depositors losing their money. I was outraged to hear that money in my low interest current account may have been at risk. I was so naive I had no idea that the banks only needed to keep a couple of percent of the account values as reserves.
    I would like to see the commission recommend changes which minimise any cost of bailing out banks when economic bubbles burst in future. The decoupling (which seems to me to be akin to that in the Glass-Steagall act) would be the logical first step.
    The emphasis in government policy should be to provide limited support to individual savers in case money is lost by banks, rather than supporting the institutions themselves.
    A system which identifies certain types of investments as ones which are not guaranteed ought to encourage savers to ensure they do not put all their money into one scheme (such as those who claim to have lost everything in the Madoff Ponzi scheme).
    We also need to ensure there is no repeat of the Landbanski fiasco and make those who invest money with overseas institutions aware that the UK taxpayer is not going to guarantee their money.


  • Comment number 72.

    Has it occurred to anyone else that if Lehman Brother had had a retail arm instead of being investment only they would have had, allegedly, access to vast amounts of free deposits and would not have had to borrow in volatile wholesale markets.
    They would not have failed and the world would have been a very different place.

  • Comment number 73.

    The lesson which the banks learned from the credit crunch is that they can have the best of both worlds.

    They can retain more funds by lending less ( minimising toxic debt risk) and by paying out low rates of interest to savers ( minimising outgoings).They can increase funds by raising their charges for loans, mortgages, accounts etc.

    Profits go up allowing them to pay big bonuses to bosses, shareholders and staff alike.

    The only way to stop it is by legal regulation and restriction of banking products, pay, interest rates etc with long Enron-style jail sentences for those at the top if they break the law.

  • Comment number 74.

    People who say certain banks did not get bailed out either do not know what they are talking about or are intentionally ignoring the facts. I suspect at least some ofn them are PR agents for the banks and their flunkeys.

  • Comment number 75.

    Another engineer @ 72 and U148 @ 64 - I akm afraid your ideological biases are showing. An expert commission is appointed by a Conservative Government and having taking extensive submissions and is going to release a draft report.

    You chaps seems to have rejected their proposals without waiting for any of the details.

  • Comment number 76.

    65. At 21:45pm 9th Apr 2011, JustKBO wrote:

    > Why are others not allowed their own independent views?

    Who would listen to bankers, now?

    > I've seen no evidence Jacques that you have any great understanding
    > of economics or risk at all.

    It's bankers who have no understanding of economics or risk at all. That's the trouble.

  • Comment number 77.

    64. At 21:41pm 9th Apr 2011, U14809524 wrote:

    > Good grief but there's a lot of rubbish on this blog today.

    Then why add more? Banks and bankers are for it. As for being naive - it was naive to think that bankers have anything but greed between their ears, wasn't it? That's all their heads contain. Pure greed.

  • Comment number 78.

    38. At 13:31pm 9th Apr 2011, Robin Gitte wrote:

    > Break 'em up! There will be no recovery until we get the insane greedy parasites off our backs.

    Truer words were never spoken, Robin.

    > Hope the Icelanders vote no in the referendum. People who put money
    > into Icebank etc were stupid. Tough.

    You got your wish - those Icelanders have guts. It's just a pity the Britons are now slaves to banking concerns.

    Rule Brittania? Not if those horrid, common, greed-obsessed bankers have their way.

  • Comment number 79.

    Cassandra, you say

    'People who say certain banks did not get bailed out either do not know what they are talking about '

    So just to clarify please tell me exactly how much taxpayers' money has been paid out to support Cooperative Bank, Standard Chartered and HSBC? I've read all the way through the National Audit Office's official report into the financial support for banks and I can't see reference to any.

    And the argument that because the government took equity stakes in some banks (RBS, Northern Rock, etc) it actually 'bailed out' them all. Because what it was bailing out was the whole UK financial system - manly money transmission.
    The Financial Services Compensation Scheme protects all depostiors' savings up to £85k and has been running for years - albeit previously with a lower limit of £30k. So no little old granny was ever going to lose their deposit.

    So the reason for the rescue was not to protect grannies from losing their savings. It was to stop the complete collapse of the money handling and transmission services that support every business, big or small, in the UK.

    So if the government hadn't rescued the banks that were going belly up then it's true other banks might have followed. But quickly on their heels would have been Tesco, Sainsbury, all the other shops that sell food, all the petrol stations, etc - because nobody would be able to pay for anything.

  • Comment number 80.

    So, Jacques:

    'It's bankers who have no understanding of economics or risk at all'

    And you have? So nobody, anywhere, working in a bank understands economics or risk? So who does? Apart from just you?

    Are you comfortable on your pedestal?

  • Comment number 81.

    What short memories people have - look at the following

    Northern Rock
    B & B
    HBOS
    A & L

    All failed because they were small retail UK banks

    Barclays and HSBC (those evil casino banks) did not fail

    The so called Banking Commission consists (predominately) of people with political agendas and who have little knowledge of commerce let alone banking.

    What is required is a proper review of banking conducted by successful business people who can put aside the political hysteria: and who also recognise that the deficit has not been caused by Banks (though they have not helped) but by massive over-spending by successive governments

  • Comment number 82.

    80. At 09:06am 10th Apr 2011, JustKBO wrote:

    > So nobody, anywhere, working in a bank understands economics or
    > risk? So who does?

    The millions of people who are impoverished by the selfish behaviour of the outrageously greedy dunderheads who work in the City.

    > Are you comfortable on your pedestal?

    Not until the banks (and bankers) are broken down to size.

  • Comment number 83.

    79. At 08:57am 10th Apr 2011, JustKBO wrote:

    > So the reason for the rescue was not to protect grannies from losing their savings. It was
    > to stop the complete collapse of the money handling and transmission services that
    > support every business, big or small, in the UK.

    That's why we must decouple the banks and parts of banks from each other from now on. Contagion is to be stopped, KBO, and you know it as well as I do.

  • Comment number 84.

    81. At 09:19am 10th Apr 2011, Decentjohn wrote:

    > What is required is a proper review of banking conducted by successful
    > business people

    That excludes bankers then.

  • Comment number 85.

    1. It is supposed to be the very essence of the capitalist system that failure in a business venture shall result in its demise so that other, fitter, competitors shall fill the vacuum thus created. Without that spur the capitalist system forfeits the basis of its claim to superiority over other (eg socialistic) systems.
    2. So there is virtual unanimity among supporters of the capitalist system that it is blatantly wrong that any privately-owned business be allowed to rely upon being bailed-out by government money if it so mismanages its affairs as to be threatened with going bust.
    3. Despite that, some "universal" banks have been bailed-out by the taxpayer. They were judged, by governments, to be "too big (or "systemically too important)" to be allowed to fail. Thereby their losses have been socialised whilst profits continue to flow to employees and investors.
    4. This (even though on this occasion only some of these universal banks were bailed-out) made explicit what the market had already correctly factored-into the price that *all* of them pay for the money they raise. That means that their business has effectively been enjoying a subsidy, simply as a consequence of being deemed to be "too big to fail".
    5. Patently, this is a violation of the capitalist system.
    6. The Banking Commission seems to be taking the view that this must be ended, in the public interest. It is proposing that if the riskiest, most speculative, investment-banking activities were to be split away from the "basic" functions of banking - namely, financial mediation and the payments system - these investment-banking businesses could in future be allowed to fail. Were they to do so, investors and shareholders would lose their money, whilst the "ring-fenced" retail parts of the bank would not be affected.
    7. There is plenty of room for argument as to whether the Commission's proposed solution would achieve the desired result.
    8. However, that is not what the banks themselves are arguing. They are arguing that there is nothing whatsoever wrong with their enjoying a subsidy at the taxpayers' expense and that therefore it ought to be continued - indefiinitely. They further argue that it is to *our* benefit that they be allowed to go on making money at our expense and to their own sole pecuniary benefit!
    9. At the same time they are confirming - something their apologists have previously sought to magic away - that it is indeed correct to say that they (all of them, bailed-out or not) are enjoying that subsidy. They admit this when they acknowledge that if their investment arms were split away that would instantly make them less profitable, because the risk of failure to which they would thereby become exposed would make it more expensive for them to raise funds. But they advance this not (as the Commission argues) as a good reason for doing just that, but as the reason why it ought NOT to be done because, they say, that would be bad for US!!!

    You couldn't make it up.

  • Comment number 86.

    @64. U14809524:

    I agree with you. Which is why I personally don't think the Commission doesn't seem (according to RP's blog) to be being nearly radical enough in its thinking.

    It will be interesting though to read the complete report.

  • Comment number 87.

    @68. nautonier wrote:

    "No need to reply ... we'll have to wait and see! The 'devil will be in the detail.'"

    I agree. I think we both basically want the same thing :-)

  • Comment number 88.

    @71. Paul_of_Surrey wrote:

    "I was so naive I had no idea that the banks only needed to keep a couple of percent of the account values as reserves".

    That puts you among the vast majority of the public. How many people realise that the instant their salary is paid into their bank account (which they are given absolutely no choice by their employer but to go along with) it ceases to be theirs and instead becomes the property of the bank, whilst all they own is the bank's IOU?

    "The emphasis in government policy should be to provide limited support to individual savers in case money is lost by banks, rather than supporting the institutions themselves".

    But have you not realised that the underwriting of such a guarantee (aka "deposit insurance") is at our (the taxpayers') expense, not the banks'? ie, it's yet another subsidy they enjoy and, even worse, it enables them to gamble with relative impunity with the depositors' money because if they lose their bets the taxpayers' guarantee covers most of the tab.

  • Comment number 89.

    it would be fantastic if we could have a level headed approach to this conundrum but alas georgy porgey will look after his fraternity,he will do what his "right" for the brotherhood not for the people and the country...

  • Comment number 90.

    hi/it appears that my responses are not available for me to peruse,could you put it right??thankyou...

  • Comment number 91.

    Paul Mason has an excellent article on this subject on his blog:-

    http://www.bbc.co.uk/blogs/newsnight/paulmason/2011/04/banking_commission_regulation.html

  • Comment number 92.

    Yep, I think it goes like this.....

    The only way we will believe that these "firewalls" are anywhere near strong enough, is if the banks then decide for themselves that a better option is to split apart their retail from their casino banking section.

  • Comment number 93.

    85. At 10:39am 10th Apr 2011, torpare said
    "[...]"

    Very well reasoned and very well said.

    It's shocking that while the banks themselves already admited that their investment banking arms profitability depend on being part of an entity that has a state guarantee, there are still people here saying that the UK government is not helping banks.

    If the Investment Banking arms of the UK "universal banks" are such inherently profitable bits of those banks, then on their own they should prosper and flurish, since they will not have to work under the rules that only apply banks that take deposits or give loans to retail customers.

    That they themselves are already starting to squirm however, shows how much they are aware of just how essential the state guarantee has in the cost of capital for leveraging in their investment banking operations.

    I would not be at all surprised that most of their "investment strategies" are of the no-brainer "get cheap money from the money markets and put it in something slightly more risky (say BBB rated bonds)" kind, that are essentially just a form of milking the state guarantee. No state guarantee => no cheap money => no profit from these strategies.

    Personally, having worked with pure investment banks and also with the investment banking arms of the likes of RBS, my expectation is that, once the state guarantee is removed, the later will either, due to it's heavy and inneficient structure, become unprofitable or get some competent management in which will do a real housecleaning and turn it into a lean and mean operation, possibly also reducing it's dependency on the UK market.

    The same logic that the UK government uses to defend the liberalization and removal of state subsidies for industries like energy both here and abroad also applies to investment banks:
    - In the mid and long term, removing the government protection that UK investment banks have will kill the leeches and create room for the real winners to prosper, while turning them into lean-and-mean companies. This is the only way for the UK to produce world class companies that are capable of competing head-to-head against the best out there.

  • Comment number 94.

    test post to see if site working

  • Comment number 95.

    There are several tainted memebers on this banking commission that is supposed to report on how to break banks up and make them safe.

    Bill Winters worked for JPMorgan Investment Bank! Martin Wolf works for a right wing London paper, the Financial Times, which is highly infiltrated by the "City". And it gets even worse! Take Martin Taylor - he was the boss at Barclays, which had to go cap in hand to some Arab potentates when it crashed through greed back in 2008.

    Basically, it looks like we've got a bunch of "right uns", as we used to say. We need a commission to investigate how this bunch of chancers job this job!

  • Comment number 96.

    Hi Robert, How about some background on this Private Members Bill, What's this all about?

    Douglas Carswell MP announced a bill that would end fractional reserve banking. It’s produced below in full (directly from Hansard), but I’ve added some explanatory comments in [brackets]. The bolding is mine. The bill passed to a second reading, which will be held on Friday 19th November 2010.

    http://www.youtube.com/watch?v=HMGr-OuXihg&feature=player_embedded

  • Comment number 97.

    Busy posting today, Jacques. Is it raining in Birkenhead?

    But you said:

    > So the reason for the rescue was not to protect grannies from losing their savings. It was
    > to stop the complete collapse of the money handling and transmission services that
    > support every business, big or small, in the UK.

    'That's why we must decouple the banks and parts of banks from each other from now on. Contagion is to be stopped, KBO, and you know it as well as I do.'

    So how do you know that decoupling the banks will always ensure that the vital money transmission services are protected? Within, say, Barclays do you know which side of the fence (retail or 'casino') money transmission activity mainly takes place in? Because it could be that you model would allow to fail that bit that is actually most important to the economy.

    But I'll admit I really know very little about this. I'm just always curious about people who have such utter certainty they are right. Like you, it seems. So how do you really know you are right and that what you propose is in the best interests of the majority of people in the UK?

    But the commission will say whatever it says and try to tread a tightrope between seeming to do something (and all politicians are mainly just interested in how things appear to the public), maybe improving stability a bit, but not killing the goose that lays a very occasional rancid egg.

  • Comment number 98.

    @95. Jacques Cartier wrote:

    "Basically, it looks like we've got a bunch of "right uns", as we used to say. We need a commission to investigate how this bunch of chancers job this job!"

    I think all that's needed is a one-person Banking Commission, consisting of your good self, advised by yourself. Perish the thought that such a body should include anyone who knows anything about how the existing banking system works!

    For a couple of decades back in the twentieth century I took two daily papers:- The FT and the Daily Mirror. Both consistently achieved high standards of journalistic excellence, in their very different ways (this was before Rupert Murdoch's "Sun" appeared on the scene and began a race to the gutter). I would say the FT was marginally the more radical in its editorial policy (and had an arts page second to none - but on the other hand The Mirror did have 'The (priceless) Perishers'), because whilst The Mirror *always* supported Labour, regardless, the FT on some occasions supported Labour too but on others the Tories based on what it judged to be the merits of their policies

    But, when all's said and done there's no substitute for good, old-fashioned, mud-slinging...

    Heigh-ho!

  • Comment number 99.

    @ 97. At 16:53pm 10th Apr 2011, JustKBO wrote:
    > Busy posting today, Jacques. Is it raining in Birkenhead?


    I’ll just check…. (looks through kitchen window across River Dee, the Wirral and a distant Merseyside) … nope, it’s lovely there, like it is here in north Wales. It’s lambing time, and the kids have gone over the moors for a look.

    >> 'That's why we must decouple the banks and parts of banks from each other from now
    >> on. Contagion is to be stopped, KBO, and you know it as well as I do.'

    > So how do you know that decoupling the banks will always ensure that the vital
    > money transmission services are protected?

    Because I’ve studied systems for donkey’s years, and the banking system is hopelessly coupled. I wouldn’t expect bankers to know that, because all they have between their ears is pure greed. But it is abundantly clear to any systems engineer that the banking system is a load of tosh that is waiting to fail. Remember the rule - low coupling in any system is essential for resilience.

    Bankers haven’t got to the start line yet.

    > But I'll admit I really know very little about this.

    That’s too bad. There are Open University courses on these things! I’ve just finished an MSc, as it happens, while I worked on the biggest computer system in the world at the same time! It's designed to find the Higgs Boson!!

    So don't just sit there moping - give it a try. It only takes 6 years. Then we can have another chat, if you like. We'll help those dunderheads in the City to sort their systems out, once and for all.

  • Comment number 100.

    98. At 18:02pm 10th Apr 2011, torpare wrote:

    > all that's needed is a one-person Banking Commission, consisting of your good self

    Thanks for those kind words. You're right - I would kock those bankers into shape in very short order. I am a very big fan of Thatcher's "short sharp shock treatment" for the miscreants.

    >> @95. Jacques Cartier wrote:

    >> "Basically, it looks like we've got a bunch of "right uns", as we used to
    >> say. We need a commission to investigate how this bunch of chancers job this job!"

    > Perish the thought that such a body should include anyone who knows anything about
    > how the existing banking system works!

    It's not that important how the old, broken and discredited banking system worked.

    The important thing is how the new replacement system will function, once we’ve thrown the shallow-thinking greed merchants in the “City” out on their ears.


 

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