Banks don't have the right to win
Posted by Janice McGinn in on Tue, 03/11/2009 - 17:36
RBoS is shedding 3,700 jobs. It is another deposit for a sizeable chunk of 30bn taxpayers’ pounds to break-up its ill-begotten banking empire.
News of the new job losses at RBoS leaked Monday evening and dominated the early evening chatter at the successful launch of the FSI Club in Scotland. The debate was engaging and about the dangers of pinning too much national identity and economic wellbeing on the FSI sector - and on one or two big names that are now perceived globally as has-beens.
One comment was about the need for banks to ask themselves hard questions before fooling around with other people’s money and asking if a bank, any bank, has an automatic right to win?
RBoS and Lloyds-owned HBOS clearly didn’t deserve to win first time around and indeed lost heavily. Others are paying the price of that failure. Both are overly dependent on UK economic growth, which is pretty thin on the ground and neither is likely to flourish abroad anytime soon since their brands are tarnished globally.
Still, new leadership has the right to try. RBoS’ CEO, Stephen Hester said he believes the break-up, “marks a key milestone in the radical restructuring we are undertaking to bring RBoS back to standalone strength... we now have the clarity that will allow us to move forward and we will do that with both strong resolve and confidence.”
Of course, not everyone has confidence in his confidence. The financial markets didn’t like the news overmuch and RBoS shares were amongst the worst blue-chip performers.
Similarly, the EU is not overly impressed by RBoS standalone strength and announced that it is not allowed to rank any higher than five in the global all-debt league table for the next three years.
The Bottom Line:If Mr Cable has his way...
"If Mr Cable had his way, all the big banks would be broken up and bonuses would be virtually eliminated - a sure-fire way in my view of guaranteeing an end to the UK’s ability to compete as an international financial centre. Let’s not forget that this is a man who is on record as saying that everyone who works in a bank has an ‘aristocratic lifestyle’ clearly demonstrating his lack of understanding of the sector." A tough line on bankers’ bonuses could make a brain drain of financial talent a distinct possibility, warns Paul Marsden. Read more