Gary's News and views

Gary Streeter MP for South West Devon

Gary writes a weekly article which appears in the Plympton Plymstock and Ivybridge News in South West Devon. The articles are published here.


Saturday, 28 July 2012


Have you ever been between a rock and a hard place? That is where the UK is with its banking industry right now and the way forward is far from clear.

The rock? The UK financial services sector accounts for over 10% of all of our country’s economic activity and without it we would be in even deeper trouble. London is the world’s premier financial capital which is a significant boost to the economy.

The hard place? Investment bankers have behaved disgracefully in recent years and, driven by personal greed on a massive scale have triggered a completely avoidable credit crunch and recession. The bonuses they have paid themselves have engendered public anger that I have not encountered before.

The decision to take regulation away from the Bank of England in the late 1990’s and give it to the Financial Services Authority proved disastrous and appeared to foster a reckless attitude, knowing they would not be detected. Sub-prime lending, Libor fixing, short term deals driven by profit, inappropriate swap products sold to the wrong people, we have all read about it.  Sadly this was all driven by a short term focus on personal profit.

But the dilemma is this: if we hit UK banks and bankers too hard they will up sticks and remove themselves to another jurisdiction and instead of getting 40% of all their profits to help fund our public services we will get 100% of nothing! Tokyo, Frankfurt and New York are already pitching like mad to get them to relocate.

What we really need is a change of culture within the banking industry. When I started as a lawyer in the 1980’s bank managers appeared to be on the side of their customer, whom they had probably known for years and gave good independent advice. Over thirty years this role developed into that of a glorified sales person, trying to sell you more of the banks products.

The government is insisting on certain changes. We are going to force banks to separate their high street (retail) services from their investment arms to prevent the cross contamination we have seen recently. We are going to tighten the regulatory regime and give it back to the Bank of England. We are trying to encourage banks to lend sensibly again.

But we must allow them enough slack to remain in the UK and flourish. To get the balance right we need the Wisdom of Solomon. Any applicants?

posted by Gary @ 11:11