By Claire West
Members of the UK200Group of independent accountancy and lawyer firms have commented on the latest report from the Financial Services Authority (FSA) on how to prevent another banking crisis, including the recommendation that there should be greater separation between banks’ retail and trading activities:
Jonathan Russell, partner, ReesRussell and vice-president UK200Group:
“Separating core banking activities from their ‘trading/dealing’ operations would potentially reduce the risk to the core banking system; it would however mean that the core banking sector would not benefit from the sometimes huge rewards generated from this trading area. If the core banking services were to be separated, it would almost certainly lead to an increase in the price to the consumer as banks try to improve the margin they make on clearing activities.
“The underlying problem is still that the banks’ balance sheets are not as good as they should be and certainly nowhere near as good as they would expect of a business customer. The credit crunch really was the banking industry realising that they had got it wrong and they are now busily trying to realign the balance sheets and matching short-term lending with short-term borrowings. This is why the mortgage market is under such pressure as banks do not have access to sufficient long-term money to lend to customers on a long-term basis.”
David Ingall, partner, JWPCreers:
“I can see the risk-averse FSA version of their brave new world as being a nightmare. It will hit lending and if a transaction does not tick all the boxes it will not be done. Thus, there will be no development, little lending and it will be a commercial nightmare. The old saying that ‘banks will only lend you an umbrella when it’s not raining’ will become real. Regulators should regulate, not try to create a new world in their image.”