George Osborne is ducking the radical banking reform we need and which the cross-party Banking Standards Commission has demanded over the course of five reports.
The Government is simply failing to stand up to the banks on key issues including the safety of major institutions, boosting choice for consumers, increasing financial inclusion, the high risk-high bonus culture and on stimulating economic growth.
It’s clear that George Osborne and Nick Clegg have been so busy promoting myths about the global financial crisis and the reasons for the UK’s current economic situation that they’ve begun to believe them. That may not only explain their failed economic strategy, but also go some way to explain why they’re missing the point on banking reform.
It is worth reminding ourselves that the global crisis did not have its root in UK government expenditure, but was sparked when Lehman Brothers collapsed in New York in September 2008 and hit most major economies in the West. The problem lay, not in public expenditure but, in irresponsible private borrowing and lending fuelled by incompetent and irresponsible bankers. The scale of the UK’s current borrowing is because we nationalised private debt to prevent the banks collapsing.
That’s why we cannot allow a repetition of the risks to the taxpayer in the future, which is why banks must be reformed in the UK and globally.
Banks have consistently fought change. In January 2011 the then Barclays chief executive Bob Diamond said: “There was a period of remorse and apology for banks - I think that period needs to be over.” Really?
Since then we have had scandals including:
- The mis-selling of payment protection insurance (PPI), for which banks have already put £14 billion aside to cover the cost of compensation
- Attempts to rig the LIBOR benchmark, for which US and UK regulators have so far fined banks a total of £1.7 billion.
- The mis-selling of interest rate swaps. The FSA has estimated that more than 40,000 swaps have been sold to small and medium businesses since 2001. The largest banks have already put aside just over £1.1bn to cover the mis-selling costs
Unless the government gets to grips with financial services reform, based on the all-party Parliamentary Commission recommendations, the only thing we should bank on is more failure.