Vickers on banking
Discussion
Fittster said:
Eric Mc said:
Fittster said:
Eric Mc said:
So the state provides "no risk" banking?
What if the Post Office gets privatised?
It's not 1980, you don't have to privatise everything any more What if the Post Office gets privatised?
The state could provide a simple banking system, as it has previously done. If you want additional returns or more services go to the private sector but if it goes wrong don't coming running back to the taxpayer.
I wonder would teh commercial banks countenance such an idea as they NEED the normal low risk "investors" to provide them with the large cash base to allow them to speculate.
If those who just wanted basic banking were told that the only safe place for their money was with a state owned bank, I think the commercial banking sector would just implode.
If a nationalised bank would be such a super organisation maybe we should completely nationalise RBS.
Considering the private banking sector was able to compete successfully with Giro bank for 30 years, why could it not do that today? Are they paying out such large wages these days that they have become uncompetitive
wolves_wanderer said:
I think in this climate a lot of people would remove deposits from normal retail banks, after all, its not like they'll be losing masses of interest at the moment.
Where would they put their savings instead, given that there are low caps on National Savings?Or would you remove the caps and maybe remove the tax-free ststus as well?
Fittster said:
Eric Mc said:
Fittster said:
Eric Mc said:
So the state provides "no risk" banking?
What if the Post Office gets privatised?
It's not 1980, you don't have to privatise everything any more What if the Post Office gets privatised?
The state could provide a simple banking system, as it has previously done. If you want additional returns or more services go to the private sector but if it goes wrong don't coming running back to the taxpayer.
I wonder would teh commercial banks countenance such an idea as they NEED the normal low risk "investors" to provide them with the large cash base to allow them to speculate.
If those who just wanted basic banking were told that the only safe place for their money was with a state owned bank, I think the commercial banking sector would just implode.
If a nationalised bank would be such a super organisation maybe we should completely nationalise RBS.
Considering the private banking sector was able to compete successfully with Giro bank for 30 years, why could it not do that today? Are they paying out such large wages these days that they have become uncompetitive
Ozzie Osmond said:
wolves_wanderer said:
I think in this climate a lot of people would remove deposits from normal retail banks, after all, its not like they'll be losing masses of interest at the moment.
Where would they put their savings instead, given that there are low caps on National Savings?Or would you remove the caps and maybe remove the tax-free ststus as well?
At the moment do you imagine that the average person would be happy to leave their money in banks that are now subject to normal risks of capitalism? Where they, being in effect creditors/shareholders are now also subject to those same risks? Would Joe and Joanne Normal be happy to have their life savings at risk, however small? Where would the mass removal of deposits leave the normal banking system?
The banks NEED ordinary low risk deposit takers to provide them with the underlying capital to allow them to speculate.
We've been here before - back in 1929.
Banks do need to recognise that a vast core of people who put money into bank accounts are not risk takers and that these funds should not be used by banks to gamble.
We've been here before - back in 1929.
Banks do need to recognise that a vast core of people who put money into bank accounts are not risk takers and that these funds should not be used by banks to gamble.
"Chancellor George Osborne is expected to announce to MPs that he will legislate to separate retail banking from more risky investment activities.
The move was recommended by Sir John Vickers in his report into banking, launched after the financial crisis."
http://www.bbc.co.uk/news/business-16239255
The move was recommended by Sir John Vickers in his report into banking, launched after the financial crisis."
http://www.bbc.co.uk/news/business-16239255
Question - Do building societies have 'investment' arms?
If not, and if people really cared enough about this, they could make a point of all putting deposits in building socs and only getting mortgages from them.
Building Socs rates seem just as 'competitive' as banks afterall.
Instead they wait for govt to seperate retail/investment for them?
Also, do building socs utilise the interbank lending facilities, and would you describe this as part of the shadow banking system?
If not, and if people really cared enough about this, they could make a point of all putting deposits in building socs and only getting mortgages from them.
Building Socs rates seem just as 'competitive' as banks afterall.
Instead they wait for govt to seperate retail/investment for them?
Also, do building socs utilise the interbank lending facilities, and would you describe this as part of the shadow banking system?
12gauge said:
Question - Do building societies have 'investment' arms?
If not, and if people really cared enough about this, they could make a point of all putting deposits in building socs and only getting mortgages from them.
Building Socs rates seem just as 'competitive' as banks afterall.
Instead they wait for govt to seperate retail/investment for them?
Also, do building socs utilise the interbank lending facilities, and would you describe this as part of the shadow banking system?
In the "old" days when there were plenty of medium sized building societies about, People had choices as to which building society they could place their savings and/or take out a mortgage. Building societies had much greater restrictions on what they could do with the money they held on deposit for their members because they were effectively owned by those self-same members.If not, and if people really cared enough about this, they could make a point of all putting deposits in building socs and only getting mortgages from them.
Building Socs rates seem just as 'competitive' as banks afterall.
Instead they wait for govt to seperate retail/investment for them?
Also, do building socs utilise the interbank lending facilities, and would you describe this as part of the shadow banking system?
Following the mass demtualisation of the building society sector, this effectively destroyed the ethos of the building society and remnoved a huge amount of choice from that sector. By becoming banks, they effectively became part of the commercial banking sector where they could gamble, speculate and lose their depositors' money - just like a normal bank. and of course, the top executives began to reward themselves "in line" with what they thought was the norm for top bank executives.
Not one building society that demutualised survived this process. They either became wholly owned subsidiaries of larger banks or went bust (Northern Rock anyone?).
crankedup said:
Good news hearing that the Government is to firewall the investments / retail banking sides. Taking away the investment banks safety net should see some chaff sorted from the wheat. Just need the 'pay boards' aka shareholders to do their job now.
But as posted above, B&B, NR etc didn't have investment bank divisions.All in all, (given the increased solvency margin proposed as well) there will be much less mortgage lending, and the lending which does take place, will be far more selective (as it used to be).
House prices should drop (plumit?) over time - and in the meantime, it will be far harder to get a foot on the 'housing ladder'.
And really, all that was wrong (imho) was overlending of mortgages - it all went pear-shaped from there (as discussed on many other threads, so no need to revisit here!)
House prices should drop (plumit?) over time - and in the meantime, it will be far harder to get a foot on the 'housing ladder'.
And really, all that was wrong (imho) was overlending of mortgages - it all went pear-shaped from there (as discussed on many other threads, so no need to revisit here!)
Ali G said:
House prices should drop (plumit?) over time...
How so? Have you not been following the basics of supply and demand?Demand for accommodation remains very buoyant, after all everyone has to live somewhere, and residential rents are very firm. Sufficiently firm to deliver 7% returns at current market valuations. Against this background it's hard to see much of a fall in prices. Inflation at 5% certainly erodes values but still leaves a landlord with a positive return.
Ozzie Osmond said:
How so? Have you not been following the basics of supply and demand?
There are estimate 900,000 empty houses in the UK.http://www.guardian.co.uk/money/2011/dec/03/empty-...
Ozzie Osmond said:
Ali G said:
House prices should drop (plumit?) over time...
How so? Have you not been following the basics of supply and demand?Demand for accommodation remains very buoyant, after all everyone has to live somewhere, and residential rents are very firm. Sufficiently firm to deliver 7% returns at current market valuations. Against this background it's hard to see much of a fall in prices. Inflation at 5% certainly erodes values but still leaves a landlord with a positive return.
Secondly, they are going to be lending less, in order to stay within revised solvency margins
Thirdy, they'll have to charge more for the reduced level of lending to maintain profits.
As a rule of thumb, borrowing should be 3.5 times income, and that should focus the minds on the value of property that may be purchased. If average house price in an area is significantly above 3.5 times the average income for that same area, then this may be an indication that property has been overvalued (rebuttable presumption that this is due to overlending). Admittedly, this is a very crude metric!
Eric Mc said:
In the "old" days when there were plenty of medium sized building societies about, People had choices as to which building society they could place their savings and/or take out a mortgage. Building societies had much greater restrictions on what they could do with the money they held on deposit for their members because they were effectively owned by those self-same members.
Following the mass demtualisation of the building society sector, this effectively destroyed the ethos of the building society and remnoved a huge amount of choice from that sector. By becoming banks, they effectively became part of the commercial banking sector where they could gamble, speculate and lose their depositors' money - just like a normal bank. and of course, the top executives began to reward themselves "in line" with what they thought was the norm for top bank executives.
Not one building society that demutualised survived this process. They either became wholly owned subsidiaries of larger banks or went bust (Northern Rock anyone?).
Yes, i have pondered this many times before. It seems demutualization has been a wholly undesirable action driven by an irresposible (and in hindsight, given their failure, short termist) drive for profit.Following the mass demtualisation of the building society sector, this effectively destroyed the ethos of the building society and remnoved a huge amount of choice from that sector. By becoming banks, they effectively became part of the commercial banking sector where they could gamble, speculate and lose their depositors' money - just like a normal bank. and of course, the top executives began to reward themselves "in line" with what they thought was the norm for top bank executives.
Not one building society that demutualised survived this process. They either became wholly owned subsidiaries of larger banks or went bust (Northern Rock anyone?).
But my point was with regards to the remaining mutuals. There are still many about, and seem to offer rates of savings and loans that are competitive with banks.
I had assumed given none of those that remained mutual appears to have failed (i think one or two small ones did, but were salvagable enough to be merged with bigger building socs) they did not depend on LIBOR and thus were shielded from the volatily in that market at the time.
I mean, to the layman, it might appear we have a perfectly serviceable, sustainable 'banking' system in the form of Mutuals.
With the exception of The Nationwide, all the rest are fairly small operations with very limited high street presence.
We may actually see a resurgance in building societies akin to what happened in the late 19th and early 20th centuries - which would be a good thing.
Another fairly safe form of lending (although usually for smaller amounts) is the Credit Union. These are very popular in Ireland and in the old industrialised parts of the UK but you don't see them in the more affluent parts of the country.
I think there could be a scope for the enlargement of the Credit Union movement too.
All is not lost. We just have to look at alternative methods of saving and borrowing. For far too long the mega-banks and demtualised building societies ruled the roost - and more or less blew themselves up with their own greed and ambition.
We may actually see a resurgance in building societies akin to what happened in the late 19th and early 20th centuries - which would be a good thing.
Another fairly safe form of lending (although usually for smaller amounts) is the Credit Union. These are very popular in Ireland and in the old industrialised parts of the UK but you don't see them in the more affluent parts of the country.
I think there could be a scope for the enlargement of the Credit Union movement too.
All is not lost. We just have to look at alternative methods of saving and borrowing. For far too long the mega-banks and demtualised building societies ruled the roost - and more or less blew themselves up with their own greed and ambition.
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