It's Not Just Banking to Blame for Our Problems, but It Can Lead Us out of Them; Chief Executive of the British Bankers' Association Angela Knight on the Lessons of the Recession and Outlook for the Financial Services Sector

Western Mail (Cardiff, Wales), January 6, 2010 | Go to article overview

It's Not Just Banking to Blame for Our Problems, but It Can Lead Us out of Them; Chief Executive of the British Bankers' Association Angela Knight on the Lessons of the Recession and Outlook for the Financial Services Sector


Byline: Angela Knight

I SUSPECT that not many of us will be sorry to say goodbye to 2009. But, after watching all those reviews of the year, I'd rather look forward to 2010.

So, is 2010 going to be an easy year? No - but it can be a year in which the UK is honest about our problems and, by addressing them, can properly start the economic recovery.

Last year the financial system was stabilised. Now we have a recession to deal with.

The recession is evidently partly a result of the crisis. But the recession was always going to happen. The Chancellor was honest when he said in his major economic statement in early December - the Pre-Budget Report - that three quarters of the deficit in the public finances is "structural" resulting from public spending. The balance of 20% to 30% is a consequence of the financial crisis.

Most banks operating in this country have not had - or needed - Government or taxpayer assistance.

But huge numbers continue to be bandied for the support given to the banks. And, while what has actually been spent is still big, it is much less than the headlines would have people believe and primarily made up of two things: the shareholding in RBS and in the assistance given to Lloyds to stabilise HBOS.

And, don't be under any illusion: this is not sleight of hand "free" money - it is a loan which will be paid back in full and the taxpayer will make a profit. Rightly so.

The UK is not unique. All countries have had to intervene to stabilise their financial markets. And, as everyone has had difficulties, taxpayers in other countries have had to bail out many more banks than here. But in no other country has help been given in as open and public a manner, so it is easy to think that others have had fewer problems. This is simply not the case.

UK banks are, however, well aware they are disliked. They know they have few - if any - friends.

They understand they are held responsible for the whole problem - even when this is manifestly not the case. Which is why, regardless of the rights or wrongs of the argument, the industry is addressing not just the third of the economic problem that can be laid at its door, but is seeking to find ways to finance the UK recovery and doing its bit to help resolve the other, greater share of the problem.

So, what are the main issues? I believe they can be typified by: responsible change, proportionate reform and sustainable institutions.

Responsible change will help us meet the demand for finance - particularly from businesses - that was created when other lenders exited the market. This gap includes lending in the UK by overseas banks as well as, for example, the kind of non-bank lending so important for both small companies, when they lease equipment, or individuals , when they buy cars.

Here, the banking industry can do much to help - and get the economy moving - provided the changes our authorities are making are wise.

And, what we need to do is: finance the economy out of recession; pay back the taxpayer; complete designing, and start implementing, the new world banking regulations; and ensure the UK's regulatory and tax changes are in step with the rest of the world and keep the us competitive.

Responsible change will bring this about. However we seem to be on a different road.

Banking is an international industry.

For changes to be effective they have to be agreed internationally and implemented evenly around the world.

But to date the UK has done more - and moved faster - than any other country, and ahead of the G20 decisions and requirements.

Now, the reason the UK has gone first is partly political, partly in response to a general view that, "something must be done and quickly" and partly because our leaders are not yet facing up publicly to the true reasons for the recession.

So let's look at some of the things that have been done. …

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