Blog 2023 Malcolm Blair-Robinson

It is not yet clear exactly what the proposals will actually be to secure the retail side of banking from the investment or casino, side. Many, including it is said the Bank of England Governor Sir Mervyn King, would like completely separate companies with no linear connection. The Chancellor’s plan may fall short of this, hence reference to fences and walls. The trouble with those is that fences and walls can be broken down or climbed over.

We therefore need to be clear about what is required. This is the freedom of vast universal banks to collapse with total shareholder loss, without affecting the domestic financial structure of the retail or High Street banking system. The prospect of that happening will do much to curb the wilder aspect of what has become almost a casino sport, as shareholders grasp that ruin will be the product of over confidence and greed. In addition the retail banks must be returned to the level of stability and probity they enjoyed prior to Big Bang, with the additional statutory requirement that any rescue by taxpayers requires the transfer of all the shares to public ownership for £1.

The simple truth is that the public are no longer willing to allow shareholders to own and profit from banks which taxpayers have to rescue when the folly of bad practice leads to disaster. In such a moment it must be clear that taxpayer to the rescue means taxpayer takes all.

From the very beginning the chances of Greece getting through without a default of some kind were very slim. They are now very slim indeed. The reason is not so much financial; the figures were a calamity at the start. It is political. The simple truth is that populations will put up with just so much, but when the sacrifices, cuts and social deprivations reach a certain point, consensus crashes, strikes and protests abound, political cohesion is replaced by opportunism, government authority weakens and nobody knows what is coming next.

Greece is in this situation because it is the Euro. The Euro is in this situation because it has no central government, only a Central Bank. The Bank’s policy is now at odds with its largest economy, Germany. All around Europe and within Greece itself, there are competing priorities and arguments about what do do. If some loan is cobbled together to stop a quick default, nobody, literally nobody, thinks that will stop a default later. The worry is contageon. Will the chaos spread? The advent of the universal, multinational bank greatly increases the risk.

How this will end is not yet clear. A storm is brewing and it is time to prepare. Osborne has done well thus far, though by shuffling around with a commission which has come up with banking reforms much on the lines all but the bankers themselves have been proposing since the crash ( including this blog and 2010 A Blueprint For Change), he may have wasted valuable time to secure our vulnerable U.K. banks. Let us hope his decision now to do so, will not be too late.