Too reckless or too canny
So is Scottish finance too reckless or too canny?
Scottish finance has taken a lot of criticism for reckless risk-taking in recent years, notably at its two biggest banks.
But were Scottish financiers willing to be risky enough, and were they sufficiently innovative?
It may be a question worth considering when the Chancellor, Alistair Darling, and Archie Kane, a senior executive director at Lloyds Banking Group and chairman of the Association of British Insurers, present a gathering of big cheeses in Edinburgh's financial sector with the findings of a report into the global prospects for UK Finance plc.
It may be further discussed at the meeting, also scheduled for this morning in Edinburgh, of the Council of Economic Advisers, set up by First Minister Alex Salmond, and chaired by former Royal Bank boss Sir George Mathewson.
That's where the somewhat contrary argument was put at its most recent meeting.
According to the minutes, it was argued, by an unnamed adviser: "If the Scottish banks had been relatively aggressive in the preceding years, Scottish fund managers had been relatively conservative.
"In particular, Scotland played only a modest role in the boom in alternative assets - hedge funds and private equity - since 2000.
"In 2009, however, with the winding down of both these new sectors, this relatively conservative stance may be seen to have served the Scottish industry well.
"Moreover, Scotland's competitive advantages - which rely in large part on a reputation for trust and solidity - are likely to be of particular value in the years ahead.
"There are, however, some questions about Scotland's long run competitive advantages in this sector.
"The fact that Scotland did not appear to be an especially attractive location for private equity or hedge fund managers, even though it may be a relief in the current environment, raises questions about whether Scotland is at the forefront of innovation in this sector."
And one of the questions arising out of that: are Scottish universities, so innovative in so much of what they do, sufficiently plugged into the appetite for finance sector innovation?
Hullo, I'm Douglas Fraser, and I'm business and economy editor at ´óÏó´«Ã½ Scotland. Welcome to my blog, where you can read my take on money matters, viewed from a Scottish perspective.
Comment number 1.
At 15th May 2009, nine2ninetysix wrote:As a nation just canny enough, individuals will always go too far, Goodwin is a prime example.
Interesting to see George Matthewson is chairing the meeting. From memory he was the one who started shredding finance jobs and the move away from traditional banking values and ethics. He also hired Fred to continue his legacy. Equally from memory wasn`t George also a non-banker?
Are we so short of talent we have to recycle those who caused the problem in the first place?
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Comment number 2.
At 15th May 2009, Wee-Scamp wrote:Firstly, there is nothing remotely innovative about either hedge funds or private equity because neither of these create much that's new. So we should not lament the fact that they're not well represented in Scotland.
What we really lack in Scotland is real risk equity capital - venture capital if you like. We need our financial services sector to become much more involved with developing and growing the Scottish economy and we certainly need to be creating and supporting many more high value adding companies than we have been in the past 25 years or more.
So if you like Scottish financiers weren't and still aren't taking the right kind of risks and it's educating them to do that which is going to be difficult especially with someone like George Mathewson involved!
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Comment number 3.
At 16th May 2009, coineach watson wrote:The first Scottish Bank was originally created in Wanlockhead as a MUTUAL BANK, as are most of the building societies. They can only lend a percentage of their receipts. All these institutions are generally well run and secure. OK, you say Dunfermine Building Society - I firmly believe a Labour Party ploy to unsettle the Scottish Financial Institutions in view of the SNP being in power in Scotland. The lenders (i.e. commercial organisations) still owed the FULL DEBT to the DBS and would have been contracted to repay it and still pay interest on it until the capital was repaid.
The previous Chancellors of the Exchequers permitted (the limited) banks to be involved in Fractional Reserve Banking, (look it up on the Internet) where they only have to have a percentage (usually about 8%) of the money they lend out. Basically they create money out of thin air and cause the problems. This is simply LEGALISED FRAUD on a very large scale. If FRB had not been allowed then there would have never been the Depression of the 1930s nor this Credit Crunch. Governments MUST control finance in countries and NOT let it be taken over, by questionalble means, by Private Banks - as in the USA. The Federal Reserve Bank in the US is a PRIVATE BANK and controls the whole US economy - no wonder it is in a mess. Was JFK assassinated because he wanted to close the Federal Reserve Bank in April 1962 by issue of Executive Order No: 11110 and take currency issuing back into the hands of the Government??
Interesting how many Chancellors of the Exchequer end up with nice 6 figure salaries as ex-executive directors of banks after they leave Parliament - for "services" rendered??? And we talk about current MPs having their "nose in the trough" - it has been happening for YEARS!!!!
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Comment number 4.
At 16th May 2009, coineach watson wrote:Reference "Fred the Shred's" pension, I note that Lord Myners is a "Former teacher, financial journalist, banker and pension fund manager". I am sure that when the controvercy and news dies down, then the Good Lord Myers will (quietly) retire - with a nice pensionable or non-executive directors job from one of the financial institutions "for services rendered" to the banking industry.
Is he, yet another with his "nose in the trough" and protected by others of a similar ilk????
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