Editor's Viewpoint: Banks finally face some consequences
Yesterday was not a good day to be a banker.
Even the most thick-skinned banker must have felt some twinges of embarrassment at the words of both the Chancellor, George Osborne, and the chairman of the Parliamentary Commission on Banking Standards, Andrew Tyrie. Mr Osborne referred to the banks' greed and corruption while Mr Tyrie said the banks could not be trusted to stick to any rules imposed by the Government.
The public has waited five years not just to hear such words but also for the Government to take meaningful action to prevent the banks ever sending us into economic meltdown again. The plan to separate the ordinary activities of banks from their investment operations is a sensible one and, as Mr Osborne said, will allow banks to continue to operate for the general public even if their investments fail. But, heeding Mr Tyrie's warning, the plans also include powers to split up banks entirely if they try to get around the proposed ring-fencing of retail and investment operations. These are welcome developments for the long-suffering public who are still feeling the pain of bailing out the banks – to the tune of £65bn – when they crashed thanks to reckless lending. It is heartening that the Chancellor has adopted a relatively tough line and, unlike previous ministers, has not bought the banks' argument that the sector will be undermined by too much regulation and banks may take their operations elsewhere. That argument – which is also used to justify huge bonuses for top level bankers – does not wash any more. There is no evidence of banks deserting the UK and given the global recession it is difficult to see where they might go anyway.
Ultimately they have no-one to blame but themselves and even now the public suspects they are not contrite for their past sins. They still want to pay out huge bonuses, even in those institutions largely owned by the taxpayer. Like Mr Tyrie, the public has little faith in the banks sticking to the rules and therefore want strict controls and even stricter monitoring of their operations.