Get the facts
The first report from the Good Banking forum explores the notion of what a good banking system would look like, you can download it here.
For some assorted facts on the banking crisis and our campaign see below.
Facts on the banking crisis:
- Government support for Britain’s banks has reached a staggering £850bn and the eventual cost to taxpayers will not be known for years.[vi]
- Home repossessions hit 14 year high in 2009 [iii]
- 1.31 million people were made redundant during the recession [i]
- Unemployment hit a record high of 2.53 million people in January 2011[iv]
- There were 6.2 million fresh claims for Jobseeker’s Allowance between April 2008 and November 2009 [ii]
- In Jan 2010 six consecutive quarters of contraction ended, which saw the economy shrink by about 6%, or 10% compared with where it would now have been had the slump not occurred.[v]
Rewards for failure:
- The global banking bonus pool for 2011 is likely to be between $600 billion and a $1,000 billion (one trillion dollars) worldwide.[vii]
- Total UK based bonus payments are still expected to amount to more than £6bn this year, with HSBC’s Stuart Gulliver in line for up to £10m, Barclays’ Bob Diamond £9.5m, RBS’ Stephen Hester £2m in shares and Lloyds’ Eric Daniels £1.45m in shares.[viii]
What are you campaigning for?
A good banking system is one that is economically, socially and environmentally fit for purpose. You can read our full campaign statement here.
Why have you launched this campaign now?
In June 2010 the government established the Independent Commission on Banking to consider structural and related non-structural reforms to the UK banking sector. As the deadline for responses to the Independent Commission on Banking’s interim report passes initial proposals for reform are falling far short of what is needed.
Why do you think the initial proposals are falling short of what is needed?
First and foremost we think there needs to be a full separation of retail and investment banking so as to better insulate and protect tax-payers against failure and provide depositors with safe institutions in which to deposit their money.
Why do you think a full separation is preferable to ‘ring fencing’?
The Chancellor, George Osborne, has endorsed ring-fencing retail and investment banking through ‘Chinese Walls” but this will not produce a banking system that is safe and fit-for-purpose. If companies can continue to move capital between retail and investment banking, the latter could still endanger the former.
Forbidding banks to engage in both retail and investment banking, as U.S Congress did following the Wall Street crash of 1929, would mean customers’ deposits in retail banks will be put at less risk.
Such a separation would also protect the retail sector from the fast and loose culture for which the investment sector is known; a culture which most customers of retail banking have little knowledge of, or interest in.
What is wrong with the current too big to fail model?
The vast size, scale and influence of the too big to fail banks is an economically and democratically unsustainable situation. By reducing the size of the banks, and the range of their activities we help prevent the situation where banks are so big and influential, that governments must bail them out when they fail. At present the public underwrite the activities of banking whilst banking profits are accrued by a small section of society.
What is the difference between retail and investment banking?
Retail banking mostly refers to those banking services used by individual consumers and small businesses; currents accounts, savings accounts, mortgages etc.
Investment banking mostly assists individuals, corporations and governments, often in more risky activities such as mergers and acquisitions, trading of derivatives, fixed income instruments, foreign exchange, commodities, and equity securities.
Why is competition important?
By breaking up and downsizing the banks we can also improve the chances of genuine competition and choice.
To build a more resilient and responsive banking system we need to create a genuinely plural system, with much more real choice about the type of banking that it is readily available.
Why are you calling for another investigation into the financial crisis?
We think we need an independent, wide-ranging and extensive inquiry into the root causes of the worst banking crisis for over 60 years. Unlike the USA, there has been no independent and systematic analysis of why the crash happened. We need a full investigation into issues ranging from the nature of credit creation, to the provision of universally accessible utility banking services, tax reform, and the role of the accountants and credit ratings agencies in the crisis.
See the nef (new economics foundation) website http://www.neweconomics.org/publications?keys=&tid=9