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.

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
techApple has just launched its latest mobile operating software – so what should you do first?
Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

PROMOTED VIDEO
Arts and Entertainment
Actor and director Zach Braff
tv

Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Arts and Entertainment
tv

Arts and Entertainment
The former Doctor Who actor is to play a vicar is search of a wife
film

Matt Smith is set to join cast of the Jane Austen classic - with a twist

Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes hobby look 'dysfunctional'
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
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

Property Underwriter

£70-90,000: Saxton Leigh: Our client a London Market Insurer are seeking a Pro...

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week