Bankers should realise their risk to us – not the other way around

Only Labour continues to speak up for the taxpayer in banking, writes Cormac Hollingsworth.

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The FT reports (£) today that the British Banking Association (BBA) has written to Financial Secretary to the Treasury Mark Hoban telling him the new regulator should be obliged to conduct a “cost benefit analysis” of the effects of any new regulation on the banking industry.

Greedy-fat-cat-bankersIf we let this pass because we’re so used to this language we’re foolish. Shall we compare the bank’s cost benefit analysis of regulation with the equivalent taxpayers’ analysis of the banks?

The taxpayer would first put in the cost of the £60 billion taxpayers put into the banks that failed; followed by the lost output of almost half a trillion pounds since 2007, and finally the enormous taxpayer debt of three hundred billion that, if Osborne does his 100-year bond, our great grandchildren will still be paying off.

If the BBA took into account the enormous cost of banks’ failures in the last five years, they would be more silent on cost benefit analysis of regulatory change.

However, it is illuminating that they don’t, because it goes to the heart of the problem in our financial system – the failure to take into account the risk to the system. And this is crucial.

 


See also:

ECB bailing out British banks exposes coalition’s finance failure 27 Feb 2012

The next credit crisis will hit consumers, not banks 26 Feb 2012

If RBS’s board is not held to account, it could become a new Leyland 24 Feb 2012

The government has the power to stop Hester’s bonus, they just don’t want to 27 Jan 2012

A word for 2012: Liquidation 4 Jan 2012


 

The collapse in 2008 revealed that individual profit-seeking behaviour by banks could destabilise the whole economy. So we’d be mad to allow that regulatory cost-benefit analysis applied only to banks’ profits. But that’s what the BBA wants.

If that happens, our regulator will always come out in favour of regulation that destabilises the economy!

But, even so it is illuminating that the banks continue to fail to take into account of the system-wide effects of their actions. Even in their lobbying, it would appear the taxpayer doesn’t count.

But before we give the banks the benefit of the doubt, in the past five years, what actually has changed in the banking industry? Sadly very little.

Capital levels aren’t any higher following the government intervention, despite the fact a member of the MPC and a member of the FPC both believe capital levels should be at least half as high again.

Furthermore, lending is lower than when the government intervened. It’s worse than it was in 2007, because the banking industry is still behaving the same and shows no sign of learning the lesson. They have done nothing to earn any right to speak up.

But that doesn’t stop them from lobbying hard, with the budgets to back their lobby firms like the BBA. So who is speaking up for the taxpayer?

Unfortunately what voice there might have been from the coalition has been crushed. The financial services bill doesn’t put the primary goal of regulation as being to protect taxpayers. Instead, all the power lies with an unelected Bank of England Governor that may deign to phone the Chancellor of the Exchequer when the governor thinks there is a problem.

Only Labour continues to speak up for the taxpayer in banking. It’s time for Ed Balls to get the credit for repeatedly telling the government that “the buck stops with the taxpayer, so the taxpayer should have a say on regulation”.

As we see, if we let the bank profits alone run our regulation, we’ll be back in a crash sooner than you can say “bash the bankers”.

 


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30 Responses to “Bankers should realise their risk to us – not the other way around”

  1. leftlinks

    Left Foot Forward – Bankers should realise their risk to us – not the other way around //t.co/x2jErm70

  2. Political Planet

    Bankers should realise their risk to us – not the other way around: Only Labour continues to speak up for the ta… //t.co/RujDX3GP

  3. Move Your Money UK

    Good piece on FSB frm @leftfootfwd. Bt regulation not enough, financial system must internalise needs of wider society //t.co/0Z0HQeNt

  4. Cormac Hollingsworth

    Good piece on FSB frm @leftfootfwd. Bt regulation not enough, financial system must internalise needs of wider society //t.co/0Z0HQeNt

  5. Anonymous

    Quantify the risk.

    70 bn bank bailout losses as a one off cost. Most caused by Gordon Brown paying over the odds for shares, and for selling insurance after the fire. Offset against the tax revenues of 50-60 bn a year.

    So remember that its banks that pay a large amount of tax to fund mad cap government.

    Now compare that against the unfunded debts of the state. 7,000 bn.

    Who is going to protect us from the nutters in power running frauds?

  6. Anonymous

    So the taxpayer should have a say on regulation.

    No problem with that.

    Now, how about the tax payer getting a direct vote on any taxrises?

    Ah yes, somehow I see you objecting to the tax payer having the say on the money you’ve wasted.

  7. Andrew Crory

    Bankers should realise their risk to us – not the other way around, writes @CormacHolly: //t.co/eD23eXTk

  8. Cormac Hollingsworth

    RT @leftfootfwd: Bankers should realise their risk to us – not the other way around //t.co/tru5xGSk

  9. Darren Sharma

    RT @leftfootfwd: Bankers should realise their risk to us – not the other way around //t.co/tru5xGSk

  10. Darren Sharma

    My reax to @BritishBankers revealing letter to HMT on "cost of regulation" @leftfootfwd //t.co/IuzPvWf3

  11. Sue

    Bankers should realise their risk to us – not the other way around, writes @CormacHolly: //t.co/eD23eXTk

  12. Blarg1987

    Well the tax payer has been voting for tax cuts over the last 30 odd years, which is a contributing factor to the economic mess we are in.

    People are very quick to vote for a penny off their income tax, but don’t realise it costs them their job after. As their is a lack of forsight.

  13. Anonymous

    So the taxpayers says reduce tax. Who carried on spending without the money? That’s the guilty party.

  14. BevR

    RT @leftfootfwd: Bankers should realise their risk to us – not the other way around //t.co/IqfLbUgE

  15. Blarg1987

    By that logic, are you implying people who fall for ponzi schemes are at no way at fault as the party that caerries it out?

    The goverments of the time carried on spending as if they came forward and said we will give you tax cuts but services will suffer they woudl have NEVER got in, as I said people are short sighted and we are all paying for it.

  16. Anonymous

    Ah yes, gotta have those demagogues and tyrants running the show. And how about you pay your share, rather than ripping everyone off, so that tax can be reasonable for 99%? Oh wait, unpossible, your mouth needs to be stuffed for dripple-down!

    Gambling on the stock market is gambling, and should be regulated by the gambling commission.

  17. Anonymous

    You. You’re guilty, feral 1%er. You haven’t paid your share of the wealth in tax.

  18. Anonymous

    Absolutely, the risk of not taxing where the wealth has gone.
    And yes, you’re in power and running a massive fraud.

  19. Anonymous

    A large group of men turn up at your door, take you away, lock you up, take your property, because you didn’t join the ponzi.

    So on the voting for tax cuts. When was ‘Cutting tax’ an option on a ballot paper? All I’ve been given is a choice of the next thief in Westminster

  20. Anonymous

    If only I was one of the 1%. I wouldn’t be complaining. Are you going to donate to my fund to help me get there?

  21. Anonymous

    Enough is never enough.

  22. Blarg1987

    Let’s see:

    Conservative party in the late 70’s 80’s and early 90’s, Labour in the early 90’s saying they will not increase tax to pay for investment in public services after previous labour policies said they would increase taxes to pay for it but they never got in.

    So yes several political parties have had that policy for years and it has happened i.e. top rate of income tax cut through the 80’s etc.

  23. JC

    If our esteemed government had refused to bail out the banks starting with Northern Rock, there might be a different view. Savers investments could have been protected without covering all the rest. That way, the risk would not have been to our economy, just to the banks themselves.

  24. Blarg1987

    Although I partially agree with yourr schoolof thought to quote bremner birrd and forture “if you don’t bail us out you will losse your pension funds”. it is a diffficult tightriope to walk.

  25. cameronsfollys

    [Funny how cost of mortgage/ lendg rate's increasd] Bankers should realise their risk to us – not the other way around //t.co/36sjnApI

  26. Anonymous

    Yes, well, perhaps you should stop trying to place your friends there.

    And of course you view spending on the 99% as a ponzi scheme. Which of course, implies you are campaigning to end that spending (period).

  27. Shamik Das

    #BBCqt q on bank lending – bankers should realise their risk to us – not the other way around: //t.co/T3SKzdmy by @CormacHolly

  28. Cormac Hollingsworth

    #BBCqt q on bank lending – bankers should realise their risk to us – not the other way around: //t.co/T3SKzdmy by @CormacHolly

  29. Bern O'Donoghue

    #BBCqt q on bank lending – bankers should realise their risk to us – not the other way around: //t.co/T3SKzdmy by @CormacHolly

  30. aiammaia

    #BBCqt q on bank lending – bankers should realise their risk to us – not the other way around: //t.co/T3SKzdmy by @CormacHolly

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