RUTH SUNDERLAND: Bankers still not forgiven 15 years after financial crisis
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Bankers still unforgiven 15 years after financial crisis, says RUTH SUNDERLAND: Next disaster may strike before full recovery
- Banks have lost their position as public enemy No. 1 to oil and gas companies
- But banks continue to close branches, much to the chagrin of many
- The profits of the big four banks are expected to be embarrassingly thick this year
When parliamentary committees bring in top executives for a barbecue, it can be great theatre.
The drama usually stems from the way business leaders, used to being treated with extreme deference, react to a mauling by MPs.
Thus we have the spectacle of Sir Philip Green asking a Tory politician to stop staring at him, or Barclays boss Bob Diamond being induced to declare that it is time to apologize for the financial crisis.
Diamond was wrong then and he continues to be wrong now. The bosses of the big four will appear tomorrow at a Treasury Committee hearing on the behavior of the banks.
The furore over NatWest chief Dame Alison Rose’s initial refusal shows that they are still on thin ice after 15 years.
Study: The banks may have lost their position as corporate public enemy number one to the oil companies and British Gas, but they haven’t recovered yet
Rose, who rarely puts a foot wrong, has wisely decided she’s not too busy to show up anyway. Wise move, as the taxpayer is still saddled with a 46 percent stake in her bank. She and her colleagues – Charlie Nunn of Lloyds, Ian Stuart, CEO of HSBC in the UK and Matt Hammerstein of Barclays – face an awkward session.
The banks may have lost their position as the number one public enemy of business to the oil companies and British Gas.
But they haven’t recovered yet. The huge popularity of the Netflix film Bank of Dave – a version of It’s a Wonderful Life set in modern-day Lancashire – is a testament to how much people feel abandoned. Businessman Dave Fishwick, the real ‘Dave’ from the title, fears mainstream lenders are opening the door for loan sharks, as we report today.
Earnings for the big four banks are expected to be embarrassingly large this year, thanks in large part to an increase in net interest income – the difference between what they receive in interest on loans and what they pay out to depositors. An expected increase in bad debts is still being felt.
This could lead to louder calls for a windfall levy from lenders. Windfall taxes, whether from oil companies or banks, are not a panacea.
But it can be difficult for politicians to ignore voter sentiment as the banks seem to ignore their customers. They keep closing branches, much to the chagrin of many.
National Savings & Investments’ new one-year bond, which pays 4 percent, should pressure banks to compete, but I wouldn’t hold my breath. Perhaps even more worrying is the maneuvering to water down rules introduced after the financial crisis so that taxpayers were protected from having to bail them out in the future.
Lenders say the regime of holding senior managers accountable for misconduct while on duty makes it difficult to hire talent. Ring-fencing, which separates retail banking from the high-risk casino variant, is also under discussion.
MPs should be concerned about abolishing the cap on bankers’ bonuses. Kwasi Kwarteng planned to abolish the cap on disbursements imposed by the EU after the crisis. Jeremy Hunt seems to be continuing with this. The cap has been largely ineffective, but by giving bankers free rein on bonuses in the midst of a cost-of-living crisis, Labor is providing an open target.
Even more concerning are the new risks that have emerged since Covid, the war in Ukraine and the energy crisis.
The chaos caused by Liability Driven Investment strategies after the doomed mini-budget makes one wonder what dark dangers banks are exposed to. The next disaster may strike before they have fully recovered from the previous one.