Political interference is banks' biggest risk

Bankers are complaining that political interference is now the biggest risk facing the banking industry, a report published this morning will say.

"Politicisation" of banks as a result of bailouts and takeovers now poses a "major threat" to their financial health, according to some 450 senior figures who contributed to the annual Banking Banana Skins report from PricewaterhouseCoopers (PwC) and the Centre for Financial Innovation.

It is the first time in 15 years of the study that "political interference" has even featured as a significant risk, let alone coming top. The 450 respondents hail from 49 countries and include bankers, close industry observers and regulators. But all shared the view, although for different reasons, says PwC.

"Bankers saw politics distorting their lending. Non-bankers said rescues had damaged banks by encouraging reckless attitudes. Regulators worried that governments would withdraw their support from banks before they had time to rebuild their financial strength," PwC said.

The top risk is closely related to the third – "too much regulation" – and the concern that banks will be further damaged by an over-reaction to the crisis. Several bankers have publicly complained about political interference – notably the Royal Bank of Scotland's chief executive Stephen Hester, who argued that the politicisation of RBS was hampering its recovery and would harm the taxpayer by making it more difficult for the Government to make a return on its investment. However, Mr Hester did later say that he regretted his words.

The sector's critics have argued that politicians have not gone far enough in reining in a sector which sought to return to business as usual by paying huge bonuses just months after taxpayers across the developed world were forced to inject billions to keep it afloat.

The culture of excess has led to the Chancellor, Alistair Darling, imposing a one-off 50 per cent supertax on banks' bonus pools. A similar measure has also been proposed in France, while the US President, Barack Obama, wants to introduce a levy on banks to recoup US taxpayers' funds and is proposing to ban deposit-takers from the most risky activities of "casino capitalism".

There is a certain irony in the bankers' complaints, admits David Lascelles, the editor of PwC's survey. "It is ironic that politics should emerge as a risk when the banks had to be rescued in the first place," he said. "But there is clearly a crisis in the relationship between banks and society, and it will take years to rebuild trust. Until it is, banks will operate under a financial handicap."

John Hitchins, PwC's UK banking leader, said: "With political interference as the top risk and too much regulation at number three, the concern is that the financial crisis has taken the bank industry's future out of its own hands."

Other dangers on the list include credit risk (at number two) and the economy (at number four). A lack of liquidity fell to number five from last year's top spot, while the availability of capital was a new entrant at number six. Derivatives fell from four to eight, with the final three made up of risk-management quality, credit spreads and the performance of equities.

Start your day with The Independent, sign up for daily news emails
News
peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tvPoldark episode 8, review
News
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
Arts and Entertainment
Ramsay Bolton in Game of Thrones
tvSeries 5, Episode 3 review
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence