To listen to the banks you'd think that the Government's plans to electrify a ring-fence around retail banking amounts to a frightening zapper that will destroy what remains of the industry.
As had been widely trailed, the Chancellor, George Osborne (reluctantly) caved in and accepted the principal recommendation of the Parliamentary Commission on Banking Standards, although he ducked some others. That is that the ring-fence designed to protect retail banking from the wilder parts of the investment banking industry should be strengthened by giving regulators the power to break up banks that attempt to break through it.
According to the British Bankers' Association, this "electrification" is going to make it hard for banks to raise capital, leave them with less money to lend and will create the dreaded "uncertainty" for investors. There has also been the suggestion that the Government could struggle to sell off its stake in Lloyds and RBS. And you can guess what's coming next. Someone will start claiming that it's bad for business, and yet more evidence of Britain's "anti-business climate".
At this point it's worth asking what the banks, with the exception of Lloyds which has no investment bank and so thinks ring fences are a wonderful idea, are so afraid of. If they obey the rules, there really should be nothing to worry about. The ring-fence is purely a sanction, and not one that will be at all easy to use. It will only create uncertainty among investors if they are uncertain about whether a bank's management might be composed of the sort of people who will attempt to get around those rules. They will only be wary of participating in capital raisings for the same reason.
An electrified ring-fence shouldn't have any effect on banks' ability to lend, which they've become really quite keen to do since the Bank of England started throwing cheap money around like confetti.
The other reason why there is no reason why banks that play by the rules – or at least those that intend to play by the rules – need not worry is the fact that the current in the electrified fence won't be running at anything like full strength in its early days.
If, for example, something goes wrong and a bank inadvertently breaks the rules, there will first be a warning, and maybe a slap on the wrist. The regulators will only march in with the hacksaws in the event of repeated breaches.
Shall we now look at why the ring-fence is necessary? There seems to be a new reason every few months when, like clockwork, yet another scandal comes to light. There are an awful lot of people who feel that the banks have actually got off extraordinarily lightly given the impact of the financial crisis: as the Chancellor said yesterday, 10 per cent of the wealth of this country has vanished into its maelstrom.
The danger of the electrification proposals is not that they are too harsh, but that they are too weak. When the commission tabled them it was very clear that they were there to ensure that regulators could act in the future, at a time when the economic situation has become more benign, and the banking industry has recovered its confidence, and its influence. Compliance officers and risk controllers might be the belles of the ball at the moment. But that won't always be the case.
The concern about the electrified ring-fence is whether, in that future, a regulator will have the confidence to use the powers if they are needed. The Treasury will, after all, have to approve, and approving the break-up of a bank would be a courageous decision to make. Perhaps too courageous for a future chancellor, with the City's lobbyists whispering in his ear.
Centrica's nuclear exit is no surprise
Centrica yesterday dropped a bomb on the Government's nuclear energy plans by pulling out. The next generation of atomic power plants in this country will therefore have no British involvement.
That makes some people very uncomfortable, and it's perhaps understandable. With the plants controlled from France, Japan, perhaps even China now, the Government's influence over the operators is not what it might be. And not what many people believe it ought to be, given the nature of nuclear power and the damage it can inflict on nature.
But, really, would Centrica's involvement have made all that much difference? If foreign ownership were a problem for you, well, we're already there. Centrica would only have been a minority investor if it had stayed in the game. And then there's the fact that, well, it's Centrica we are talking about. The company that runs British Gas, a business which has hardly been free of controversy.
The money that Centrica was going to spend on its nuclear investment will instead be spent on buying back its own shares. Share buybacks are of dubious benefit to investors. They favour those who want to sell out at the expense of those who remain invested. Companies all too frequently make the mistake of buying back when the price is high.
But there was hardly a chorus of complaint raised from investors in response to yesterday's announcement. They are well aware that nuclear, as an energy source, carries significant risk, and not just from the byproducts that threaten to make the milk on your cornflakes glow if the cows that produce it happen to graze near a badly run plant. It is expensive to build plants, delays and cost over-runs seem endemic to the process, and the merest hint of a problem with nuclear somewhere else in the world can derail the whole exercise as lukewarm politicians run for cover.
There are some very good arguments for encouraging nuclear, which is one of the more reliable low carbon energy sources available. But private investors remain very wary of getting involved and Centrica's decision comes as no great surprise.