Some burnt fingers in the UK banking sector on Thursday morning:
That’s because those expecting the Chancellor George Osborne to say nasty things about the banks in Wednesday’s Mansion House speech were left disappointed.
Yes, a bank levy will be introduced, but there was no mention of the likely size. And while an independent commission on the future of UK banking will be created, there was no mention of a British version the dreaded Volcker rule. (The nasty stuff was saved for the FSA).
Relevant paragraphs from the speech:
Should we restrict or split the activities of banks?
Has our banking industry become too concentrated and uncompetitive?
Now I know there are some who are frustrated that these questions are even asked.
But how can they not be when so many millions of people are paying the price for what went wrong?
There are real issues of fairness.
And that is why we will introduce a bank levy and demand further restraint on pay and bonuses.
And that is why we will introduce a bank levy and demand further restraint on pay and bonuses.
That is why the new Government is establishing an independent commission on the banking industry.
It will look at the structure of banking in the UK, the state of competition in the industry and how customers and taxpayers can be sure of the best deal.
The Commission will come to a view. And the Government will decide on the right course of action.
The Government looks forward to receiving their report next year.
Indeed, even Bank of England governor Mervyn King didn’t sound as hawish in his own speech to the assembled bankers, notes RBS:
The BoE did however reiterate its view that the amount of equity required by banks to pass a credit loss stress test is different to the amount required to finance an economic recovery, and so ‘it may take further additions to equity capital’ – though the urgency here was more tempered than historically, acknowledging that this is likely to take time. (We would add that there is no specification from the BoE whether more equity comes from share issuance or simply profit retention – our view is that given until FY12F the latter should suffice, and meantime survey data shows that loan demand from the real economy is a bigger issue than the lack of supply.)
And RBS also reckons that selling the government’s stakes in Lloyds and, er, its very own good self will remain unlikely until the banking report is released:
We suspect that selldown of the Government’s equity stakes in UK banks is unlikely before this report. Interestingly, the BoE Governor’s speech appeared to de-emphasise the need to break up commercial & investment banks, instead putting more weight on the merits of establishing a globally co-ordinated orderly bankruptcy procedures. (The ‘living will’ proposal from the FSA.)
Related links:
Tearing flesh off the FSA’s bones – FT Alphaville
Bailed-out bank stakes cost UK £3.2bn a year, JP Morgan says – FT Alphaville