Given the amount of tax-payers' money that has been pumped into the British banking system it seems rather odd that all of a sudden the investment community is starting to see it as, if not exactly a safe bet, then at least comfortingly defensive. But that is what's happening. Only the Nordic banks appear to be in a similarly happy state. If happy is the right word for anything connected with banking at the moment.
This isn't so much because of confidence in the likes of Barclays, HSBC, Lloyds and RBS as it is a reflection on just how bad things have got in Europe. The need for in excess of €100bn (£87bn) to be raised to recapitalise much of the Continent's banking system, is going to devastate shareholder value when (if) it finally gets done. It says a lot that some analysts are already breathing metaphorical sighs of relief because the figure is "only" €100bn. Let's wait and see on that one, shall we?
Things look rather different on this side of the Channel. It is true that British banks have not been free of suggestions that they too might have to reach for the panic buttons. There have been one or two research reports arguing just that. However, this research, together with the more lurid rumours floating around dealing rooms, appears to have been flawed. At least as things stand.
Time for bankers to start slapping themselves on the back and suggesting that they might perhaps deserve a bit of a bonus (or three) for keeping things steady while their compatriots on the Continent are busily falling apart perhaps? They might like to hold their horses a while.
The private (and sometimes public) bitching about the FSA/Bank of England requirements that banks hold more capital has been loud and long standing. And it hasn't finished yet.
Yesterday, however, no less than Andrew Tyrie, the chairman of the Treasury Select Committee, warned that tighter rules on capital (and other regulation) could be hitting banks' ability to lend to businesses and choking off Britain's recovery.
But is this true? The spectre of banks – private businesses, it should be remembered – going cap in hand to the taxpayer cannot be allowed to be repeated. They had to do this in the first place because they weren't sufficiently capitalised to deal with the effect of the financial crisis. To prevent a repeat requires that they be better capitalised.
As evidenced by the view of British banks as defensive, they largely now are. And yet so far no one has been able to come up with a compelling answer to the question of why the supply of credit to small and medium sized businesses is still so constrained. Perhaps, with trading statements due over the next few days, the banks' top executives might like to come up with some suggestions?Reuse content