Banking

George Osborne will formally unveil the government’s banking reforms in a speech at Mansion House later this evening. The reforms are in line with the recommendations of Sir John Vickers’s Independent Banking Commission (ICB), as laid out by the Treasury, which published this White Paper earlier today. For those who’ve forgotten, Vickers suggested splitting retail and investment banking through a Glass-Steagall-type ‘ring-fence’ mechanism that would protect retail, SME deposits and overdrafts while commanding that the ring-fenced part of the bank is not dependent on other departments for liquidity. This, it is hoped, will ensure that the taxpayer is insulated from bailouts in the future, which is, obviously, a key political

Greece is the centre of European attention, but as George Osborne met with other EU finance ministers today there was another issue bubbling in the background — Basel III. This had been brewing for a while and is yet one of those matters that threatened to isolate Britain from the rest of the EU (though some would argue this is a good place to be). The Chancellor this morning appears to have agreed to the Basel III accord, which stipulates the amount and quality of capital that banks are required to keep. But this was after much haggling — and an Osborne outburst where he said signing on to the

A week devoted to Mervyn King and his eight-year reign at the Bank of England sounds like pretty turgid stuff. But, already, the series that has started in the Times (£) this morning — building up to an interview with the man himself — is anything but. Here, for instance, is a snippet from one of its articles, by David Wighton, on how Mr King reacted to the crumbling of Northern Rock: ‘As the plight of Northern Rock and other banks worsened, Sir John Gieve and Paul Tucker were urging Sir Mervyn to act, but he would not budge. “He mocked them as ‘crisis junkies’ and more or less accused

Are Project Merlin’s lending targets just a myth? On the basis of today’s figures it’s still rather hard to tell. The arrangement between the government and the banks did yield £214.9 billion of gross lending to businesses in 2011 — against a target of £190 billion, and a 20 per cent increase on 2010. But net lending also declined in every quarter of the year. And the target for lending to small businesses of £76 billion was missed by £1.1 billion.  The banks have put this shortfall down to fewer small businesses coming forward for credit — and there’s actually some truth in that. This survey suggests that small businesses

Ed Miliband is on unusually assertive form this morning. His observation in the FT that ‘my speech to Labour’s annual conference was not — I think it is fair to say — universally well-received’ is not, I think, intended self-deprecatingly, but rather self-congratulatory, as though he were the only politician calling for a ‘responsible capitalism’ at the time. And he’s repeated that suggestion elsewhere: in a short statement for Which?, and in a Labour briefing document — entitled Who is he trying to kid? — that has been filtered around the crowd at David Cameron’s speech. Ed is trying to crash Dave’s party, and bring it crashing down. Like I

Yesterday, George Osborne announced the sale of Northern Rock to Virgin Money. Here, to mark the occasion, is the piece Allister Heath wrote on the bailout of the bank in 2007: Northern Rock: morally hazardous, Allister Heath, 29 September 2007 First we heard about ‘sub-prime mortgages’; then it was ‘collateralised debt obligations’; now it’s the turn of ‘moral hazard’ to appear on the Ten O’Clock News. Jolted out of prosperous complacency by market turmoil, the public has started to care about economics: strange jargon and obscure concepts previously familiar only to investment bankers are going mainstream.    The best way to understand moral hazard is to reflect on how taking

For all the debate about Theresa May and border security, the big news has not been at Westminster today. Instead, people have been watching what is happening in Italy. For it is far from certain that Europe, or the Western world for that matter, has a bucket bigger enough to bail out a country that owes more than Greece, Ireland, Portugal and Spain do combined. As the New York Times reports, the European Central Bank is reluctant to step in and start buying Italian bonds because it fears that its previous bond buying efforts have simply enabled the Italians to avoid necessary reforms. It feels that only market pressure will

A week may be a long time in politics, but it is no time at all in protest. As the inhabitants of Parliament Square have demonstrated, even a decade is as nothing so long as you have a constantly morphing cause, a council with no balls, and a small but steady stream of acolytes. Last weekend I watched a bridal party sneak in through the side entrance of St Paul’s Cathedral. This weekend I went back, curious to see whether the protest that had kept them from entering through the main door had located a point yet. Walking up from Fleet Street the first sight that greets the visitor is

If anyone had any doubts about how difficult the politics of banking reform and planning would be for the Conservatives, they’ll be dispelled by a glance at a couple of tomorrow’s front pages.  ‘Osborne to let banks off the hook—for now’ screams The Independent. This a reference to the Chancellor’s plans to consult with the banks on the conclusions of the Vickers report—which the government has seen but is officially published tomorrow morning. The political problem for Osborne is that anything other than the immediate implementation of Vickers’ recommendations will be seen as a favour to the banks. But pushing the reforms through now could undermine an already weak economy.

The Vickers’ report into banks will land on the Prime Minister’s desk tomorrow. It goes to the banks very early on Monday morning before being published later that day. The thing to watch for is how politicians react to it. We know that the report will propose some kind of ring fence. But what we do not know is how strict the ring fence will be and how quickly Vickers will want it implemented. As Robert Peston says the impact of the ring fence on the banks’ creditworthiness will be felt long before the actual ring fence comes into effect. Intriguingly, Ed Miliband is giving a speech to the TUC