Bankers made 'astonishing mess' - BBC story

Bankers made 'astonishing mess'

Northern Rock was the first bank to show signs of problems ahead
The effects of the continuing banking crisis will be felt for generations, a committee of MPs has warned.

The Treasury committee, in its second report on the crisis, said it had been caused largely by the banks' own reckless behaviour.

"Bankers have made an astonishing mess of the financial system," said committee chairman John McFall.

The MPs supported the various attempts of the government to bail out the banks and to shore up the banking system.

Banking culture

But they criticised banks for increasing their charges and fees to small business borrowers.

The MPs are showing due deference to the governor of the Bank of England. They won't dismiss his view "lightly". But nor do they sign up for it

Robert Peston, BBC business editor


Read Robert's blog
"The culture within parts of British banking has increasingly been one of risk-taking, leading to the meltdown that we have witnessed," said Mr McFall.

The MPs said they favoured greater regulation to protect bank depositors. And they called for further consideration of the idea of separating High Street retail banking from the more commercially risky investment banking.

They supported the government's approach of taking a direct stake in banks that were being rescued with the help of taxpayers' money.



John McFall MP: Prudence 'was missing'

But the MPs said that the details of the bank investments being guaranteed under the recently launched asset protection scheme should be disclosed, with the public being told what the assets are, how much they are worth and how much value they might eventually lose.

"The repercussions of this banking crisis are being felt, and will continue to be felt, by ordinary people for many generations," Mr McFall said.

"Looking to the future, the rebuilding of consumer trust is key."

Small business lending

As well as criticising the behaviour of banks in the past few years leading up to the start of the international financial crisis, the MPs also criticised their current lending polices.

The MPs held several sessions outside London and they were told that, contrary to the claims now being made by banks, many small businesses were finding it very hard to obtain loans, except with much higher charges and fees.


The committee deplores the behaviour of a number of those banks who have received so much public money and behaved in such an insensitive manner

John McFall MP


March mortgage approvals grow 4%
"The committee deplores the behaviour of a number of those banks who have received so much public money and behaved in such an insensitive manner, particularly to established customers," said Mr McFall.

"There is clearly an unresolved inconsistency between, on the one hand, bankers' assurances that they are increasing their lending and, on the other hand, widespread and clearly sincere complaints that credit is difficult to obtain and increasingly expensive," he said.

The British Bankers Association (BBA) replied that anecdotal evidence from disgruntled bank customers having a hard time in the recession had not given the MPs an accurate picture.

Figures on Friday from the BBA showed that lending by High Street banks to small businesses rose by£271m in March.

"The stock of lending to small businesses is around 5% higher than a year ago and has risen in each of the first three months of 2009, reflecting general banking support and individual bank pledges to make finance available," said BBA statistics director David Dooks.

Deposits by small businesses grew £881m in March.

Deposit protection

One organisation praised by the MPs was the Financial Services Compensation Scheme (FSCS).

The committee said the scheme had developed a number of "innovative solutions" to deal with the collapse of several banks in the UK.

But the MPs said banks should make it clear to their customers exactly which of their subsidiaries carried separate deposit protection.

And they recommended that each brand name run by a bank should have a separate banking licence, which would trigger such cover.

The committee also appears to be showing due deference to the governor of the Bank of England, says BBC business editor Robert Peston.

They will not dismiss his view that a separation of retail from investment banking functions is very attractive, but nor do they sign up for it, our correspondent says. "

It seems incredible that these so called bankers, behaved in such a reckless manner with money which they treated like Monopoly Money. It seems to have been a game to them - some game! It appears they borrowed cash without permission, speculated on it, tried to replace it, or speculated further on the non-existant profits. It now seems that the worst reckless souls had got into a position to do this with NO BANKING qualififications whatsoever. That seems like asking a joiner to do an appendix op! A doctor is trained to do that; a joiner is'nt and a doctor probably could not make a cupboard as he is'nt trained.

Why did the Banks get into such a position? And why are they getting off with the ridiculous bonuses for their reckless behaviour?

The Scottish Budget Pantomine!

And at last the pantomine is over - the Scottish Budget has been passed. But was all that posturing and capering really necessary?
Did it really show any of the so-called opposition parties in a good light? It seems they have not come to terms with minority government.
But take a look a what this means for Scotland:-
"
Now approved, the Scottish Budget will deliver: -
- Help for households to beat the credit crunch, providing extra funding for councils to freeze the Council Tax for another year.
- Another cut in the cost of single prescriptions from April, down from £5 to £4... with 12-month pre-payment certificates cut by £10 to £38.
- Business rates for 120,000 small businesses will be abolished, helping shops and local firms cut costs and protect jobs in these tough times.
- £230 million of accelerated infrastructure spending to keep the Scottish economy moving and support 4,700 jobs. - Extra funds to help train 1,000 additional police officers, to put more bobbies on the beat and improve safety on our streets.
- £15 million to help provide home insulation for 90,000 homes - targeted on those most in need. - £16 million to recruit 18,500 new apprentices. PLUS: - - £300 million more for the NHS. - £70 million more to invest in affordable housing. - £60 million more for town centre renewal. - £40 million more in funding for free personal care for the elderly.
- A total of £1.8 billion in additional expenditure - securing a total of 35,000 jobs!"

Now, if only, if only, every bawbee raised in Scotland remained in Scotland to be used according to Scottish priorities, for Scottish people! Instead we've got a finite 'grant', patronisingly given by Westminster.