大象传媒

Banks should be boring

• Robert Peston
• 13 Oct 08, 04:50 PM

Today investors on the stock market gave something of thumbs down to shares in Royal Bank of Scotland and HBOS - which means that we as taxpayers will almost certainly end up owning around 60 per cent of Royal Bank of Scotland and about 40 per cent of a new super-bank created by Lloyds TSB's rescue takeover of HBOS.

Think about that for a second - because it is one of the great events in the history of the British economy.

Both of these giant banks are central to how we create wealth in this country.

They look after the savings of countless millions.

They lend to countless millions.

They grease the wheels of capitalism.

But the incompetence of RBS and of HBOS means that we as taxpayers have had to bail them out to the tune of 拢31.5bn.

Chances are that this is the moment when future historians will say that the tide turned decisively against almost-anything-goes, laisser-faire financial capitalism (what I described yesterday as an important strand of Thatcherism) - which has been the prevailing ideology for almost 30 years.

It'll end because some bankers themselves have been chastened and will choose to mend their ways - and others will be hectored into doing so by the City watchdog, the Financial Services Authority, and the Treasury.

Till just a few weeks ago, the City and our banks - the financial services industry - swaggered that they were the great British success in a country with few other world-beating industries.

But as boom year followed boom year, and fat bonus followed fat bonus, many banks and bankers became over-confident, arrogant.

They forgot the essence of good banking, which is to know your customer, to measure the risks when lending or investing, and to never lend more than the customer can afford.

A great and enduring bank is almost invisible, a dull and self-deprecating provider of basic services - not the puffed up, too-clever-by-half firms that many big banks became over the past few years.

The humiliation of RBS and HBOS will probably cut all our hubristic banks down to size - it should return us to a world of simpler, safer banking.

Which would probably be a good thing - although it means the City of London will probably shrink over several years.

And that'll be a drag on the economy as a whole - unless and until they achieve what many would like them to do, which is to provide finance and nourishment for wealth-creating industries that are less prone than is the City to boom and bust.

• Permalink
• Comments (0)

Momentous Monday

• Robert Peston
• 13 Oct 08, 08:39 AM

Let's add up the .

1) Taxpayers are injecting 拢37bn of capital into just three banks, RBS, HBOS and Lloyds - with RBS and HBOS taking 拢31.5bn of that (this is nationalisation Jim, though perhaps not precisely as we know it);

2) RBS and Lloyds TSB/HBOS have promised to the government that they'll maintain mortgage lending and small-business lending at 2007 levels - which is massively more than they are currently lending (this is hugely significant - given that a shortage of credit is to a large extent behind the economy's deceleration into recession levels);

3) Lloyds TSB is paying less to buy HBOS than it originally announced, to reflect the disclosure that HBOS's problems are rather worse than it thought just a couple of weeks ago;

4) Barclays is raising 拢10bn from selling new shares and securities to private-sector investors, abandoning its dividend for the second half of this year, and taking other actions;

5) So total capital raising today, including fairly modest amounts being raised from private sources by the UK businesses of HSBC and Santander, is nudging 拢50bn (wow);

6) The Bank of England and other central banks have announced they are lending as many dollars as are needed by banks (phew);

7) Eurozone governments are today fleshing out their plans to inject capital into their own banks and to guarantee lending between banks (double phew);

8) Stock markets and money markets are in slightly better shape this morning - which is something of a relief, because if they can't be buoyed by so much taxpayers' money being chucked at the banks, then we would be in rather more serious trouble than I feared.

• Permalink
• Comments (0)

We own the banks

• Robert Peston
• 13 Oct 08, 07:24 AM

Who would have thought, only a few weeks ago, that taxpayers would end up owning around 60% of Royal Bank of Scotland and about 40% of a super retail bank formed by Lloyds TSB buying HBOS.

But that's what has been announced today by the Treasury, in what will count as perhaps the most extraordinary day in British banking history.

Those three banks alone are raising 拢37bn from the state, with Royal Bank of Scotland taking 拢20bn of that.

It will lead to changes in their behaviour.

The government has insisted, for example, that senior directors should receive no cash bonuses this year and will receive future bonuses in the form of shares - in the hope that this forces them to take a long-term approach to the way they manage what are now our banks.

The three banks have also agreed to maintain lending to homeowners and small businesses at the levels of 2007.

As for Barclays, it is proudly standing to one side.

It has agreed with the authorities to raise 拢6.5bn of new capital, but is confident it can do this by tapping its shareholders and other private-sector investors, rather than going cap in hand to taxpayers.

But it's not all good news for its shareholders - because it will abandon the dividend for the second half of this year, to save 拢2bn of cash.

• Permalink
• Comments (0)