Too Big To Insure
BBC Business reports that the Vickers Banking Commission report to back ‘firewalls’
An interim report from the Banking Commission due on Monday will not support the total break-up of Britain’s biggest banks, the BBC understands.
Instead it will favour ring-fencing their risky investment banking operations, so they do not jeopardise the savings of ordinary depositors.
The move will still cause anger at big banks like Barclays, according to BBC business editor Robert Peston.
It means their investment banking units will find it more expensive to borrow.
What this does is separate the retail banking from investment banking. The government will guarantee the retail banking unit, but the investment banking unit will be allowed to fail. The investment banking units has been “borrowing” from their associated retail banking unit, including the deposits of account holders. Now they will be required to find their funding in the market.
Barclays, for example, can still be involved in both types of banking, but people will be put on notice that their losses on the investment banking side are not guaranteed, and will not be covered. This is called “capitalism”. You may have heard about it.
Retail banking serves a social/public need and is required for commerce, but investment banking is another form of gambling.
2 comments
Well… It seems the commission is one of the first to indicate what the problem actually is, and what needs to be done (even though they didn’t actually state the problem as bluntly as we do, but still…) 😉 We can only hope the UK follows the recommendation. Would be nice if every Country followed them also (yeah, I know… dream on in a fools paradise!)
I was looking at my bank online yesterday, to see how I can solve a major hassle I have with PayPal. To whit: The PP online system refuses to allow me to attach my new Visa credit/debit bank card after I changed my account a couple weeks ago, even though I ensured, and was assured by my bank that, I would have no problems with my PayPal Premium Merchant account because the only actual change would be the new card, which is *supposedly* very easy to add to PP via the online form when I log-on! Amazingly, my Bank provides 7 day phone support, even up to 7PM on Sun! (who would have thought a major bank would have Customer Service for a lowly personal depositor? Wonders never cease…) Ahem. So, I phoned and we went through everything, and was told bluntly there was no problems with either my account, my card, or my ability to use it for online transaction, and they they could see the transaction history, and the request for verification from PayPal failed because they didn’t send the expiration date information for my card! After several emails to and fro with PayPal, they still claim it’s my bank declining the card! So, I tried another online transaction (not via PP) for $5, and it worked perfectly. So, I am looking for a new Payment Gateway/eCommerce provider. I think my Bank may actually serve me, and I will see them first thing Monday, because it’s bloody confusing!! Remember when all you had to choose what kind of bank account you wanted was Savings, Checking, or Credit? Well, those days are definitely long gone!! Look at this:
http://www.nab.com.au/wps/wcm/connect/nab/nab/home/personal_finance/6/4
I also remember I used to get 6% on my Savings acc’t, now, apparently, I get a huge 0.01%!!! WTF? (And you KNOW the Bank is getting a minimum of 10% on my money!) I have the standard “NAB Classic Banking” account. However… It seems that if I link that account to something called “NAB iSaver” I will get 5.75% and then link that to their online Payment/eCommerce Gateway, called NAB Transact, I can do more online than I could with PP anyway. I think. 😐 I guess I’ll have to go talk to the bank and ask them to *please explain* because it’s damned confusing to me! *sigh* Mind you, their Business Accounts interest rates seem attractive (19.01% according to that list). I plan to get a business name reg’d etc soon, maybe that will work (depending on gotchas, of which I am certain there will be several). 😉
Banks (and I include the likes of PayPal)! Bah… humbug!! 👿
I’m willing to bet that the iSaver involves you doing all the work, and all transactions are electronic. That would eliminate all of the bank’s overhead except hardware costs.
PayPal has morphed from a useful tool to a major PITA has its size has increased. It has obviously hired an MBA to ‘manage” things, and gotten rid of the original, core group of people who created it, with some cashing out, and others dumped as too expensive. They no longer seem to understand what it is that they do, beyond taking their cut of every transaction.
My Mother dumped one of her banks when they increased the interest on their credit card at the same time they reduced the interest on savings. It wasn’t like she had any credit card debt or was going to pay the increase, it was just the principle of the thing – charging borrowers more and paying depositors less.
Currently I’m with the local, been here since the plankton, credit union. It is solid and conservative. The professionals on the board of directors are all accountants with not an MBA in sight. The rates aren’t fabulous, but there has been a consistent spread for decades. No “innovative new products”, just banking.