There was much to discuss in yesterday’s Mansion House speech, but I would like to focus on one disappointment and one pleasant surprise.
First the disappointment; the five members of the new Independent Commission on Banking are all economists and bankers of the highest calibre and integrity. Some are on record with quite strident views about the ills of our banking system and quite radical prescriptions for their cure.
But they are all, well…, bankers and economists.
If we are to truly create a system as Mr Osborne says, where “banks support the people, instead of the people bailing out the banks”, we need to understand HOW the banks need to support the people.
- Can these five commissioners really understand the needs of small businesses?
- Can they really understand the needs of social enterprises, and local regeneration?
- Will they consider the still shameful lack of access to finance experienced by many of our citizens?
- Do they understand the urgent need for massive investment in decarbonising the UK economy?
We do not know yet how the commission will carry out its remit. It should ensure it builds a broad, credible and comprehensive stakeholder consultation on the needs of the users of the banking system, and not just get lost in the technical details of restructuring the banks.
Which leads me to the pleasant surprise.
The new commission’s terms of reference are not limited to the question of splitting investment and retail banking. They include the Government’s wider goal of “creating an efficient, open, robust and diverse banking sector”.
This last point – diversity – is crucial. To meet all society’s needs, the banking system should comprise many different kinds of institution: different in industry sector skills and expertise, different in regional and local focus, different in forms of ownership, different in investment horizons, different in culture and goals.
It’s not just that we need to look at breaking up the massive universal banks we have today, we need to look at how to build up the alternative and diverse institutions we need tomorrow.