Newspaper article The Evening Standard (London, England)

Banking Reform's Just a Fading Mirage; CITY COMMENT

Newspaper article The Evening Standard (London, England)

Banking Reform's Just a Fading Mirage; CITY COMMENT

Article excerpt

Byline: Anthony Hilton

A NUMBER of FTSE 100 chief executives are so worried Britain's banks may be broken up into smaller, safer and better-managed units that they propose to give evidence to Sir John Vickers' Independent Commission on Banking pleading for no change.

Putting aside the thought that this is rather like the nation's chickens lobbying against plans to cull foxes, they are driven apparently by the thought that a more fragmented banking system would be less efficient in meeting customers' needs, and would therefore charge them more for the services.

This not only betrays a depressing lack of faith in the power of competition but also suggests they can't count, or have already forgotten the cost to the taxpayer of the bank bailout. It's hard to know which is the more scary.

Daft though it may be, their intervention has served a useful purpose in reminding us how much the momentum for meaningful banking reform has faded, however impossible such an outcome may have seemed a year ago. It also chimes with a fascinating article in the current issue of Prospect, in which Sir Howard Davies, director of the London School of Economics and a former head of the Financial Services Authority, analyses why this is and how, despite voter outrage, the banks seem likely to carry on unscathed.

A key change, according to Davies, is the absence of the fear factor. In the months after Lehman, politicians were terrified that the system was about to collapse. This gave real purpose to the early G20 meetings, which endorsed the demands for reform. But with the -- albeit stuttering -- return to growth, politicians are no longer scared. This summer's G20 in Canada was notable more for its lack of progress than for anything concrete.

Basically, nationalism has reasserted itself, the consensus has evaporated and the energy had got dispersed on a range of different targets. French President Nicolas Sarkozy wants to hit tax havens, German Chancellor Angela Merkel dislikes hedge funds, the UK Financial Services Authority has targeted bankers' pay, US Economic Recovery Advisory Board chairman Paul Volcker is trying to curb proprietary trading. …

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