Can We Bank On 2013?


Natalie BennettIt’s the season for pundits to pontificate on the year to come – hoping that no one in 12 months time will be doing the “how did they do?” column in return. But looking into 2013, there’s one certainty that seems, from a broader historical perspective, surprising.

It’s that UK banking and finance regulation will be a huge, continuing issue. Surprising? Well it is when you consider that it’s more than five years since the queues started forming outside Northern Rock branches and it became obvious that there was a deep rottenness, a danger to all of us, at the heart of the British banking system. You might have thought, have hoped, that by now there’d have been some real action and real change.

Yet, still, we’re debating the basic points – Chinese walls, electricifed Chinese walls, or complete separation of casino and high street arms, capital reserves, controls on complex financial instruments, bonuses.

We’ve made precious little progress

“Light touch regulation” as a phrase has gone right out of fashion, but we’ve made precious little progress on replacing it. That’sBanks despite the fact that the “light touch” impacts are everywhere we turn – the PPI mis-selling scandal, the Libor manipulation, money-laundering …. the list could go on and on.

And above all there’s the fact that there’s no solution been imposed to the “too big to fail” problem; we – that’s Britain, you and I, have been seriously impoverished by the banking crash (yes, remember the prime cause of the deficit, and there’s no guarantee it won’t happen again).

Give it an overall score and the result is far from reassuring – according to the latest Country Risk survey from Euromoney, Britain is on 6/10 – worse not just than France and Germany but also Turkey, Slovakia and the Czech Republic.

So what needs to happen? Well first, we need to forget Chinese walls, electrified or not, and go straight to a clear separation between retail banking and high risk trading. Then we need to address the too big to fail problem, urgent and critically important. No bank operating in the UK should be permitted to have access to more than 10% of the domestic market or 5% of the global market.

Then we can add in a financial transaction tax. Lots is made of the money this might raise – easy to develop a shopping list of hospitals, schools, international aid … but what it should be trying to do is to reduce speculation and the types of trading that are pure gambling or gaming.

We need a new type of banking

On a bigger scale, we need a new type of banking, a system of local community banks, growing out of our flourishing mutual banking sector (i.e. building societies and credit unions), that are owned by their members without external shareholders. Once – before about mid-2007 – all of this would have sounded radical.

Community Banking Month_0When the Green Party said things like this, we were fighting the tide (“community banking” was important in our 1987 manifesto). But now, I need only quote a Financial Times editorial from last month: “The desire to reinvent banking as a high-growth, high-return business has belied its true social function as a utility. Its proper role is simply to channel capital from those with savings to spare to those with investments to fund.”

Maybe 2013 will be the year that we finally take steps towards the banking system that we need to secure our economic future. The need for radical change is clear – after five years it is time for some action.

Source –  by Natalie Bennett.

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