Reckless bankers face jail! It sounds tough, doesn't it? Just the sort of radical reform we need after the grievous damage their industry did to this country. That was the headline that the Chancellor, George Osborne, and the Business Secretary, Vince Cable, wanted yesterday as they published their 80-page response to the Parliamentary Commission on Banking Standards.
Many of its recommendations were, at least in theory, accepted. But before you start thinking that we shall indeed see the shake-up that this industry so badly requires, cast your mind back to the electrified fence that was supposed to be put up around the money we leave on deposit with banks. Fortifying the ring fence proposed by Sir John Vickers' Independent Commission on Banking with a charge was the key recommendation of the first report of the Parliamentary Commission on Banking Standards.
To achieve this, it wanted to give regulators the power to break up banks that attempted to "game" or chip away at the fence. This was designed to head off the possibility of banks being allowed to backslide into bad habits when profits are again flowing freely and the economy is on the path to a sustainable recovery. A time when politicians might be tempted to start listening to the lobbyists who have been urging them to rein in those nasty watchdogs who keep jumping on the banks, thus (allegedly) restricting economic growth.
The Treasury was to be given an ultimate veto, but the idea was that the decision of whether to go ahead with investigating a break-up would be in the hands of regulators. Now, despite proclaiming its support for the measure at the time, the Treasury has steadily chipped away at it. Far from having veto power, it wants ministers and officials involved at several stages of the process.
As such, political considerations will come into play at an early stage. There may be an electric fence around retail deposits. But it doesn't look as if the current will ever be turned on.
Which brings us to yesterday's final report. Perhaps it was always a stretch to see the Government accepting every recommendation of the Commission (although it should have).
As a result, for example, UK Financial Investments, the discredited body set up allegedly with the intention of keeping ministers at arm's length from the state's shareholding in banks, lives on. It yesterday made a new hire in the form of the senior banker Christopher Fox, who will be charged with looking after the bad loan books of Northern Rock and Bradford & Bingley. Coming from UBS, he ought to know a thing or two about bad loans.
There will be a review into whether to spin a "bad bank" out of Royal Bank of Scotland, but it will not consider the Archbishop of Canterbury's suggestion that Fred Goodwin's creaking edifice be split into a number of smaller regional banks. And there's more like these examples in the guts of the Government response.
Even when it comes to the measures that were accepted, and the bleating was under way yesterday from the City, there are no guarantees. An awful lot depends on the drafting of the legislation.
Interestingly, banking shares were on the march yesterday. That tells you a lot.
It will be a while before we truly know how much watering down of those recommendations that have been accepted is even now under way. But the chances are that bank executives will be sleeping reasonably comfortably as their lobbyists get to work. Would that were the case for those of us with money on deposit. When you hear the Government hailing the Commission's report, just remember what has happened to that electric fence.
Recovery in air is no cue for return to light touch
There were further signs yesterday that the economy may be inching towards something like a recovery.
The junior Alternative Investment Market, where young and fast-growing companies can hope to find funds (that is if they don't get lost among a forest of trashy overseas resources companies with dubious governance) saw a small flotilla of listings.
Then there was one of those surveys (from the accountancy firm BDO this time) suggesting that economic confidence is growing, which is important because it might mean that businesses feel confident enough to start investing the mountains of cash they are sitting on.
Perhaps dovetailing with that, another report, this time from KPMG on jobs, had recruitment at a two-year high.
Capital Economics was even moved to talk of the UK preparing to enjoy a long-overdue bounceback in the form of strong "catch-up growth". There's quite a lot of catching-up to be done, given the underwhelming performance of UK plc in the past couple of years.
All these various bits and pieces were noticed in the City. Shares rose. Even the pound, languishing at a four-month low against the dollar and the euro, inched off a floor on which it had been languishing since Mark Carney, the incoming Governor of the Bank of England, indicated that the current historically low interest rates will be in place for a while yet.
Happy days then, and if all this amounts to more than just a flash in the pan, the Coalition will be crowing, although we might now ask whether this happy situation could not have been achieved without attacking the most vulnerable in society.
We might also consider that, with the economy finally showing signs of recovery, now is exactly the sort of time the banks and their allies will question the reforms which have been put in place, arguing that they are not needed and, indeed, that they damage growth. That perhaps a lighter touch from the regulators would be in order. Such as that which did such a wonderful job during the Noughties perhaps?
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