Sunday 5 May 2013

Don't tell me, it's the same old useless RBS?

Gosh, I'm getting bored of UKIP already.  Nigel Farage's face on the front of all the papers yesterday was quite enough for me.  I don't think I'll blog about them again, especially as I got a slightly worrying email after last time which said: "@UKIP is following you on Twitter".

So instead I think it is time I blogged about banks.  Can I explain for a moment why my heart sank as much as it did when I heard the announcement that RBS had returned to profitability and would be privatised within a year?  The giveaway line was from chief executive Stephen Hester that the bank would be "looking much more like a normal bank next year".

Here is the problem in stark technicolour.  'Normal banks' in the UK context are wholly dysfunctional.  With one exception, the big banks have no local lending infrastructure, no lending expertise at local level, no managers allowed to take decisions, and consequently our vital small business sector is struggling along starved of the finance they need.  

I don't know, and can't find out, what the profile of RBS' recent lending is, but I expect it is much the same as the other dysfunctional banks - 70 per cent of it going into property deals, because that is all they can deal with (and they would also rather like to recreate the conditions for the last bubble).

Hester seems not to understand the basic problem in the story in today's papers, where he claims that RBS has £20bn that nobody will borrow.  The problem is they have no local infrastructure for analysing small businesses, and continue to charge outrageous rates of interest, and then wonder why the small businesses don't ask.

I am not complaining about the principle or the means of privatising the bank.  It could still be given away to every member of the population, as set out by Lib Dem policy-makers.  What really worries me is that it will be returned to the private sector exactly as it was before, when we desperately need a local and regional, and above all responsive, banking sector and RBS could have provided the basis for that.

We need what they have in America and Europe but we don't have: a diverse banking system capable of providing for Britain's struggle entrepreneurs.  Instead RBS is going to stay its old dysfunctional and useless self, except in the private sector.

I refreshed my memory of the coalition agreement on this point, and this is what I found:

"We agree to bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector; in developing these proposals, we will ensure they are effective in reducing risk."

My impression of the 'robust action' to reduce banking bonuses was that it involved battering Brussels when they wanted to reduce them.  Then there was this passage:

"We agree to bring forward detailed proposals to foster diversity, promote mutuals and create a more competitive banking industry."

Yes, the new regulator now has to bear in mind the diversity of the banking system, but what else has the coalition done to foster diversity, let alone promote mutuals so far?  It isn't possible, is it, that the coalition will leave office without having introduced any 'detailed proposals' at all?  And without doing that, how can they possibly push forward that other critical coalition objective: re-balancing the economy? 

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