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The banking crash seven years on: it's not yet business as usual The banking crash seven years on: it's not yet business as usual
(35 minutes later)
Seven years ago this week, Gordon Brown – the then prime minister – was in full combat mode. Royal Bank of Scotland and HBOS were on the brink of collapse and risked bringing down the rest of the financial system with them. Brown was left with little option but to step in with billions of pounds of taxpayers’ money to act as a “rock of stability” to prevent the financial sector collapsing. Seven years ago this week, Gordon Brown – the then prime minister – was in full combat mode. Royal Bank of Scotland (RBS) and HBOS were on the brink of collapse and risked bringing down the rest of the financial system with them. Brown was left with little option but to step in with billions of pounds of taxpayers’ money to act as a “rock of stability” to prevent the financial sector collapsing.
The intervening years have led to soul-searching through inquiries and changes in the rules about the amount – and type – of capital banks must hold to protect against collapse. Rules about the way bonuses are paid to top bankers have changed – deferral and payment in shares are now the norm for the most senior bankers. Changes are also being made to the way banks are structured following the recommendations by the Independent Commission on Banking, chaired by Sir John Vickers. The intervening years have led to soul-searching through inquiries and changes in the rules about the amount – and type – of capital banks must hold to protect against collapse. Rules about the way bonuses are paid to top bankers have changed: deferral and payment in shares are now the norm for the most senior bankers. Changes are also being made to the way banks are structured following the recommendations by the Independent Commission on Banking, chaired by Sir John Vickers.
The government still owns 73% of RBS – down from 79% – and is yet to get rid of all its shares in Lloyds Banking Group, formed when HBOS was rescued by Lloyds TSB during the crisis. This is not a normal state for the UK banking industry. The government still owns 73% of RBS, down from 79%, and is yet to get rid of all its shares in Lloyds Banking Group, formed when HBOS was rescued by Lloyds TSB during the crisis. This is not a normal state for the UK banking industry.
Yet, senior bankers are moaning about the difficulties their businesses face because of regulation. John McFarlane, chair of Barclays, is again talking about national champions in investment banking. He raised it in July and again this week by suggesting a merger of European investment banks (£) might allow a regional champion to be created to compete with US rivals. Yet senior bankers are moaning about the difficulties their businesses face because of regulation. John McFarlane, the chair of Barclays, is again talking about national champions in investment banking. He raised it in July and again this week by suggesting that a merger of European investment banks (£) might allow a regional champion to be created to compete with US rivals.
Such remarks may help explain why, just a few weeks ago, Paul Fisher, a senior Bank of England official, issued a warning against watering down the post-crisis rules. “We probably won’t know for sure just how effective the new regime is until we reach another crisis. Meanwhile, we need to guard against the reforms being rolled back as a result of a period without crisis,” Fisher told his audience. Such remarks may help explain why, just a few weeks ago, Paul Fisher, a senior Bank of England official, issued a warning against watering down the post-crisis rules. “We probably won’t know for sure just how effective the new regime is until we reach another crisis. Meanwhile, we need to guard against the reforms being rolled back as a result of a period without crisis,” Fisher told an audience in London.