Margareta Pagano: Cable talks like Robespierre – but he's in danger of turning into Mr Prescott

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The Independent Online

When the historians come to write up their accounts of the Great Recession, it may be that the events of last week prove to be the most momentous since the financial crash two years ago.

In more ways than one, it was a week in which politicians and regulators laid the groundwork for possibly the most radical shake-up of the banking industry, if not business in general, for generations.

Opening with a bang, the week kicked off with the exit of Eric Daniels from Lloyds Bank, making him the third bank chief after John Varley of Barclays and Stephen Green of HSBC to leave in a matter of weeks, and closed on Friday with a shudder when the Independent Banking Commission made it plain it is prepared to consider radical options to improve competition and the structure of the industry. There are still those who fear that by setting up this task force the politicians have kicked a sensitive issue into the long grass, but my own, possibly too optimistic view, is that the four commissioners and their head, Sir John Vickers, are deadly serious about reform and will investigate the industry with the forensic skill it needs. It will take another year, though, before we know whether they will turn into a lap-dog of the bankers. That would satisfy many politicians who will be terrified of taking on the might of the financiers. Don't forget, though, the commission has a powerful ally in Mervyn King, the Governor of the Bank of England, who does want change.

In between the two events came more fireworks: there was the warning from Lord Turner, the chairman of the Financial Services Authority, of a clampdown on consumer credit and mortgage caps. Turner's many sensible suggestions went down like lead balloons, but it was the attack a day later by Vince Cable, the Business Secretary, on bankers, calling them "spivs and gamblers" at the Lib Dem conference and revealing another inquiry into the "murky" corporate world of short-termism, that really sent the City into shock.

If you strip away the inflammatory populism of Cable's tirade, there was not much new to frighten even the bankers, and most businessmen agree with him that our shareholder culture is too short-term. But, while Cable may have sounded off like a latter-day Robespierre, he's in danger of becoming a John Prescott figure; if he keeps up his populist rhetoric and banker-bashing he'll cease to be taken seriously.

For the onus is on him, as one of the leading reformers, to carry not just the Jacobins within his party but the electorate and, most pertinently, the Government. Under all the bluster, Cable does believe in markets – whatever the Adam Smith Institute claims – but he doesn't believe in unfettered ones. And he also knows the problem in both retail and investment banking, quite apart from the headline bonuses, is that the industry is run as a series of oligopolies and cartels which prevent serious competition, quite apart from the high barriers to entry into the industry. As the Commission's "issues paper" revealed, there are big questions over the concentration of the UK retail banking industry, with, for example, the top six banks accounting for 88 per cent of retail deposits, compared with France, where 10 banks have the same market share, and even Germany, where seven banks account for 68 per cent.

Far more controversial is the issue of structure, and, while the split between retail and investment banking is the one everyone looks at, there are other options such as narrow banking, and, as readers will recall, Professor Kotlikoff's interesting ideas on limited-purpose banking. It's a horrendously complex issue and one of the reasons Cable needs to avoid the "off-with-their-heads" rhetoric and use more guile and rigour to explain the arguments; he should remember why Gordon Brown turned from Stalin into Mr Bean. Rather than just lambasting the "spivs", he must also say why the antics of short-term speculative investors are unproductive.

Still, one of the joys of this coalition is that at last there is a debate about the new financial system we must introduce. But Cable needs to use his considerable intellect, not just his heart, if he is to win over the doubters – more Voltaire than Robespierre, perhaps.

Whatever the truth behind the HSBC reshuffle, Geoghegan is unlikely to suffer

It was over dinner 10 days ago at the Goring Hotel in London that Sir Simon Robertson, HSBC's senior director in charge of finding the new chairman and now the new deputy chairman, told his chief executive, Mike Geoghegan, that he would not be getting the top job. The urbane Robertson explained that the bank had decided to break with its long tradition of promoting its chief executive to become chairman, mainly to adapt to changes in corporate governance. Robertson added that following the long selection process, going back to March, the board's nomination committee had decided the affable Scotsman Douglas Flint, the finance director, should become chairman while the charming but ambitious Stuart Gulliver, the head of global banking markets, would step up to take his role. Although the board had already noticed both for promotion, they proved themselves during the tumultuous rights issue and then the heat of the financial crisis. I'm told Geoghegan was surprised but not shocked by the news, taking it calmly, having already apparently earmarked Gulliver as his successor and that, after five years heading HSBC, he was ready for a new challenge.

Here the plot starts to thicken as the Financial Times ran the most sensational story last week claiming that Geoghegan threw his toys out of the pram, threatening to resign if he didn't get the crown. Not so, say my sources, and such an outburst does seem a rather odd way to behave. Having worked at the bank for 37 years, he would surely know blackmailing a board is not the way to get your way?

So, if Geoghegan didn't go off at the deep-end, then somebody has been blackening his name which is why HSBC is incandescent about the leak. Geoghegan, who is watching the Grand Prix in Singapore this weekend, will no doubt get his own back by landing a rather good new job.