Lord Adair Turner tells policymakers to be radical in their thinking. He analyses the current financial climate and the danger of returning to the dark days of the economic meltdown of 2008. Although a little short on detail, his speech hits the right notes in terms of discussing what exactly has happened and where we have ended up with regards the financial crisis that hit at the end of the last decade. I would ask 2 main questions with regards this-
- Has anything actually changed?
- Did anything actually need to change?
I say the answers are –
- Not really
So, where do we go from here?
I think that the banking system has come full circle from fear, through self-pity and survival mode to business as usual. The wider economy doesn’t need business as usual. Small business and consumers struggle to get finance for house purchases. And they find they are further disenfranchised by a system that they didn’t help to create. A system they didn’t ask for and now feel disengaged from. This has gone along with repossessions, liquidations and the rapid growth of the payday loan sector.
How can this happen after the major shocks of 2008 and the fact that governments own large stakes in banks?
We are on a course for a similar shockwave. One of financial crashes if there isn’t a change in the structure of the banks. A change in the way they interact with customers. And an acknowledgement of the errors of the past. A whole industry has popped up to make the most out of banks errors. These include –
- mortgage exit fees
- bank charges
- PPI miss-selling
And this is before the exposure of self-certification mortgages, interest-only mortgages, fast-tracking of mortgage clients and others. Banks have been subsidising high spending on cars, holidays and home improvements by the £10+ billion pay-outs for PPI misselling alone.
There needs to be a line in the sand drawn by the banks. This is to gain public trust again. Or maybe this has gone on too long and can never be repaired. The public appetite for payday loans seems to never be satisfied. So why not a Wonga Bank on the High Street? A series of new entrants to the market that aren’t tainted by the scandals of the past may be the only way forward. Metro Bank is making progress in London, while Virgin Money seems to have escaped the association with Northern Rock. Nationwide came out of the scandals with an enhanced reputation, as did First Direct. M&S and Tesco are starting to offer a serious proposition in terms of everyday banking.
Is this the way forward?