Tuesday, 9 June 2015

The nef > 'transforming RBS into a network of local banks'

Earlier this year, the New Economics Foundation came up with the idea of 'breaking up RBS into a network of truly local banks':
Futures Forum: Royal Bank of Bradford
Reforming RBS: local banking for the public good | New Economics Foundation

With a decision imminent on the future of the RBS, the NEF has launched a fresh campaign:

Stop the fire sale of RBS

Photo credit: simonlesleyphoto

In his Mansion House speech next week the Chancellor is expected to announce his plans to sell off RBS – at an eye-watering £13bn loss to the taxpayer. This huge loss reveals the scale of what the government is prepared to sacrifice to save the banks.

Just as he’s pushing through £13bn of cuts to public spending, on top of the £12bn of welfare cuts which will hit the poorest and most vulnerable in society, Osborne wants to sell the taxpayer-owned bank back to the private sector at knockdown prices. The British public are once more picking up the tab, and a return to too-big-to-fail banking is on the cards.

That’s why we’re calling for people to make a stand against the Government’s plans and sign this petition to block a fire sale of RBS.

Just a few months ago, Osborne was insisting we’d get our money – the £45bn spent to save RBS from collapse – back from any sale of the bank. Now, after the election, he is attempting to rush through a sale at a big loss. Returning RBS to the same structure that caused the crisis makes no sense. We’re calling for a thorough consultation that forces the question of not merely when RBS should be sold and for how much, but whether it should be sold at all.

Next week I’m sharing a platform with the head of strategy of RBS where we’ll be discussing how to fix the structural flaws in the financial system. Sign this petition and help build the case that with RBS in the public’s hands we have a unique opportunity to rebuild trust in the UK banking sector – a sale rushed through the backdoor is not the way to do so.

The story of RBS is a touchstone for much that’s wrong with the current set up of the UK financial system: bailed out by the public it’s due to be re-privatised with a string of bank fines and losses under its belt. But at NEF we believe it’s also the touchstone for how things could be transformed.

Earlier this year we published research showing how transforming RBS into a network of local banks with a public service mandate would change the face of UK domestic retail banking and bring significant economic benefits.

As I’ve said before, the assumption that the bank should be returned to the private sector deserves greater scrutiny and debate. We can’t make back our money by flogging off RBS – so let’s use our investment to fix the UK’s broken banking system, creating new players that genuinely work for us.

Privatisation is not the only answer; let’s make sure the Chancellor knows that.

ISSUES Banking & Finance

The wider media has shown considerable interest in the campaign:

UK financial system found to be least resilient in G7

Written by Liam Kirkaldy on 4 June 2015 in News

New Economics Foundation report warns unless policy-makers focus on building financial resilience, UK system remains at risk of crisis

The UK’s financial system is the least resilient of any economy in the G7, according to a report from the New Economics Foundation.

In a new analysis the UK comes last in five out of seven indicators of financial resilience, leaving it more susceptible to financial shocks than any other G7 state.

The study found the UK economy's resilience declined in the early 2000s and although it improved following the 2008 crisis it still lags significantly behind other leading economies.

Tony Greenham, Head of Economy and Finance at the New Economics Foundation (NEF) said: “Without real structural reform, we remain extremely vulnerable to future financial storms. Yet even the limited progress made since 2008 now seems at risk of being unpicked by lobbying from the big banks.”

“Far from being done and dusted, banking reform is serious unfinished business for the new government and there can be absolutely no room for complacency.

“Decisions on banking policy, including the future of Government-owned RBS, must be measured against the yardstick of financial system resilience if we are to be serious about protecting the economy from financial shocks.”

Based on 2012 data, the NEF Financial Resilience Index scores the UK’s resilience at 0.27, with the US on 0.56, Canada 0.62, Italy 0.63, France 0.66, Japan 0.71 and Germany 0.73.

The seven key financial system resilience factors forming the analysis were diversity, interconnectedness and network structure, financial system size, asset composition, liability composition, complexity and transparency; and leverage.

The report scored the UK last in terms of diversity, interconnectedness, financial system size, asset composition and complexity, and transparency.

The report says: “It is vital that policymakers develop a more sophisticated understanding of resilience and use it to help reshape our financial system. Unless this is achieved, our economy and society remain at risk of a future financial crisis.”

The report recommends separating retail from investment banking, promoting bank diversity rather than simply more ‘lookalike’ challenger banks and making efforts to increase peer-to-peer lending to increase the resilience of the financial system.

UK financial system found to be least resilient in G7 | Holyrood Magazine

Déjà vu over City’s amnesia over banking crisis

Northern Rock: Collapse triggered recession. Picture: Getty

JEFF SALWAY Saturday 06 June 2015

IT ALL started coming home to roost with the collapse of Northern Rock. Royal Bank of Scotland and HBOS followed a year later, and the taxpayer was left with a massive bill for bailing them out.

Very brief highlights of the financial crisis there, in case you’d forgotten about it. Which you hadn’t, obviously. But it’s a good time to jog the old memory, because there’s a sense that we’re entering a dangerous new phase in the post-crisis cycle.

Last week the government revealed that it is to dispose of its holding in Lloyds Banking Group and on Wednesday it will set out plans to begin doing likewise with RBS.

Meanwhile, there’s been a subtle change of tone regarding bank regulation, with a growing narrative in the City that it’s time to move on from the global financial crisis.

There’s plenty more that will sound familiar to those for whom the pre-crisis years remain fresh in the memory. House prices are soaring again and in Scotland saw the biggest increase since 2007 in the year to March, according to the Office for National Statistics.

Climbing house prices will eventually form part of the Bank of England’s argument for raising interest rates again, which will spell disaster for the growing number of people on stagnant incomes already stretched by rents, mortgage payments and household bills.

What else is there? Oh yes, household debt, which increased in March at the fastest rate since 2008, according to the Bank of England. With the Centre for Social Justice estimating that nearly nine million people are over-indebted it’s no surprise that the International Monetary Fund (IMF) warned in April that the UK is among the countries most vulnerable to a repeat of the credit crunch.

Then there’s the banks, newly emboldened by the election of a Conservative government and calling for it to water down plans to ring-fence banking activities.

That proposal, set out by the Independent Commission on Banking, was aimed at addressing the too-big-to-fail issue and will involve banks separating their retail and investment arms. Now, predictably, the lobbying against the ring-fence – due to take effect in 2019 – has stepped up a notch, with former Barclays chairman David Walker claiming there’s an “urgent and compelling need for the Government to review” it.

You’ll remember where light-touch regulation got us before. Well, a good few influential voices in the City have decided that now – as the government plots massive spending cuts that will cause untold suffering (and a fair few deaths) – is the time for the so-called ‘bank bashing’ to end.

Yet as the New Economic Foundation (NEF) has pointed out, little has really been done since the crisis to reform the financial system, which remains “extremely” vulnerable to another crisis.

The warning signs are there – in house prices and personal debt, a barely reformed banking system and a fragile Eurozone – and yet to come is the risk posed by the unwinding of central bank stimulus. So while I apologise for being a bit downbeat, it’s worth talking about these things, because we all know what happens when the lessons from the past go unheeded. Well, most of us do.

Déjà vu over City’s amnesia over banking crisis - The Scotsman

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