Bankers still not forgiven 15 years after financial crisis, says RUTH SUNDERLAND: Next disaster may strike before they have fully recovered
- Banks have lost their position as public enemy No.1 to oil and gas companies
- But banks continue to close branches, to the annoyance of many
- Big four bank profits this year are expected to be embarrassingly fat
When parliamentary committees haul in chief executives for a grilling, it can be great theatre.
The drama usually derives from the way business leaders, who are used to being treated with extreme deference, react to a mauling by MPs.
So we have the spectacle of Sir Philip Green asking a Tory politician to stop staring at him, or Barclays boss Bob Diamond being goaded into declaring the time to apologise for the financial crisis was over.
Diamond was wrong then and he remains wrong now. Bosses of the big four are due to appear at a Treasury committee hearing tomorrow into the behaviour of the banks.
The furore over the initial refusal to attend by NatWest chief Dame Alison Rose shows they are still on thin ice, even after 15 years.
Scrutiny: The banks may have lost their position as corporate public enemy number one to the oil companies and British Gas, but they are not yet rehabilitated
Rose, who rarely puts a foot wrong, has sensibly decided she is not too busy to turn up after all. Wise move, since the taxpayer is still saddled with a 46 per cent holding in her bank. She and her peers – Charlie Nunn of Lloyds, Ian Stuart, CEO of HSBC in the UK and Matt Hammerstein of Barclays – face an uncomfortable session.
The banks may have lost their position as corporate public enemy number one to the oil companies and British Gas.
But they are not yet rehabilitated. The huge popularity of the Netflix movie Bank of Dave – a version of It’s a Wonderful Life set in modern-day Lancashire – is testament to how badly people feel let down. Businessman Dave Fishwick, the real ‘Dave’ of the title, fears mainstream lenders are opening the door to loan sharks, as we report today.
Big four bank profits this year are expected to be embarrassingly fat, thanks in large part to a rise in net interest income – the difference between what they receive in loan interest and what they pay out to depositors. An expected rise in bad debts has yet to make itself felt.
This may lead to louder calls for a windfall levy on lenders. Windfall taxes, whether on oil companies or banks, are not a panacea.
But it can be hard for politicians to ignore voter sentiment as the banks seem to disregard their customers. They continue to close branches, to the annoyance of many.
The new National Savings & Investments one-year bond paying 4 per cent ought to put on pressure for banks to compete, but I wouldn’t hold my breath. Of perhaps even greater concern is the manoeuvring to water down rules brought in after the financial crisis so that taxpayers were protected from having to bail them out in future.
Lenders say the regime to hold senior managers accountable for misconduct on their watch makes it hard to hire talent. ‘Ring-fencing,’ which separates retail banking from the risky casino variety, is also up for debate.
MPs should be concerned about the scrapping of the cap on banker bonuses. Kwasi Kwarteng planned to abolish the limit on payouts, which was imposed by the EU after the crisis. Jeremy Hunt appears to be pressing ahead with this. The cap was largely ineffectual, but giving bankers free rein on bonuses in the middle of a cost of living crisis offers Labour an open goal.
Even more concerning are the new risks that have emerged since Covid, the war in Ukraine and the energy crisis.
The mayhem caused by Liability Driven Investment strategies after the doomed mini-Budget makes one wonder about obscure pockets of danger to which the banks are exposed. The next disaster may strike before they have fully recovered from the last.