This week saw the publication of the report on the future of banking by Sir John Vickers. I have always argued that the banking industry needs to be sorted out and that new regulation might be required to achieve that.
The central recommendation by John Vickers is that banks should clearly separate their retail banking operations, that is dealing with people like us in High Street branches, from so called “casino banking”, where the banks speculate on world markets. It was the mixing of these two that got the industry in a mess last time round. The banks were like gambling addicts who had lost the plot and they were raiding our wallets to keep their habit going. Worst of all, the banks lost the ability to distinguish between an asset and a liability. Some banks treated toxic debt as an asset against which they borrowed yet more money. It couldn’t go on, and so we all paid the price.
Sir John Vickers has also identified another problem with the banks: the lack of competition. I frequently have people come to see me who have been treated appallingly by their banks and ripped off with loads of invented, cooked up charges which the banks just add on people’s account without a hint of shame. I have also seen small businesses bullied by banks because they currently hold most of the cards in their relationship with their customers.
We need to rebalance the law in favour of enterprise and against the vested interests of the banks. That is why I have introduced a Private Members Bill which will protect small businesses against aggressive sharp practice by lenders.
It annoys me that some people in the banking industry think it is acceptable to carry on regardless and still claim whopping bonuses just because they used to. I don’t agree that you need to pay that sort of money to get good people. There are far more intelligent and able people at the top of medicine, education or the military in this country. Such people are paid well but don’t expect a seven figure bonus at Christmas. The truth is that the banks have enjoyed a totally unsustainable high pay culture which bears no resemblance to the true value of the work they do and, in their own jargon, a “correction in the market” is required.
Of course, any suggestion that we should introduce some sort of accountability on these people immediately causes them to threaten us. They tell us that they might stop lending to small businesses, that they will take us to court to protect their contracts and bonuses or that they will leave the country. But they have cried wolf enough. Let them go if they want to. Otherwise, they should get over it and get on with their work.