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Published today is this year's “Banking banana skins” — an annual survey by the CSFI think-tank and PricewaterhouseCoopers of things likely to trip up unwary bankers.
Inevitably it gives a lot of space to political interference, regulation and its consequences, both foreseen and unforeseen. Other than the prospect of a double-dip recession and the nightmare of sorting out their portfolios of bank loans, the industry seems to think of little else.
It helps in trying to understand where we are and whether the bankers are right to be concerned to recognise three distinct strands in the way banking regulation is moving.
There are the efforts to make banking safer led by the G20 and Basle committees, there are efforts to change the structure of the industry, prompted by President Obama and the chairman of his Economic Recovery Advisory Board, Paul Volcker, and there are proposals to give the authorities a new set of tools which both the Bank of England and the Financial Services Authority have already started to hint at.
The safety proposals work on the basis that if you improve a car's brakes and shock absorbers it is less likely to crash. Hence the demands for more capital, restraints on dividends and bonuses, the holding of bigger reserves of liquid assets, and a tax on transactions. All will indeed make the banking car safer. But better brakes don't stop road accidents; they simply give bad drivers the confidence to go even faster. History suggests it is the same in banking.
The Volcker reform efforts are an attempt to stop banks gambling with depositors' money. Gambling is acceptable if the stakes on the table are kept to a sensible size but that's not the case when the banks are as big as they are now. The Obama proposals are a step towards separating gambling from conventional banking but the likes of economist Roger Bootle argue this is the right direction but insufficiently bold. Much bank gambling is dressed up as market making and dealing for clients. The solution is to make banks either act as agent for their clients or deal as principal for themselves but no longer to allow them to do both. It is time to reverse Big Bang and the massive conflict of interest it legalised. It is time to reverse the liberalisation of 1985 which allowed organisations to make markets and also deal on behalf of clients.
The third strand hinted at in a speech last week by the Bank of England's Andrew Haldane, and separately by the FSA's Lord Turner in Davos, is that future credit booms might be better controlled by the application of direct targeted credit controls rather than relying solely on interest rates. A housing boom could be curbed by restraint on mortgage provision, without damaging the rest of the economy — as indeed it used to be 30 years ago.
There are no firm ideas on the table as yet but it is interesting that it is being floated as a possibility. Indeed it underlines what someone said recently about financial sector reform. It is not the end of banking as we know it; it is the return to banking as we used to know it.
Questions over Crozier's links
It was predictable perhaps that Adam Crozier's becoming chief executive of ITV would be the cue for some pointed jokey line on the lines of “Does Adam Crozier have talent?”
But there are more significant things. ITV's new chairman, Archie Norman, worked with Allan Leighton in the Nineties when they revived Asda. Subsequently Leighton was the chairman of Royal Mail when Crozier was appointed chief executive there.
It has thus been widely assumed that Leighton recommended Crozier to Sir Archie. Normally one would ask: “Why not?” It is the way business works.
This time, however, it is complicated by the fact that Leighton is also a long-serving, non-executive director of BSkyB, which is not only ITV's most ferocious competitor but also owns a 17.9% stake in it which has been the subject of some controversy recently.
This is the legacy of BSkyB attempt a few years ago to prevent ever-stronger competition by blocking a takeover by bid of ITV by NTL — now Virgin Media. Since then BSkyB has been ordered by the Competition Commission to reduce its ITV stake to less than 7.5% — upheld by the Appeal Court only the week before last — but it has yet to do so. Conspiracy theorists will no doubt see in this the long hand of Rupert Murdoch.
It would suit Murdoch to have an ITV chief executive who would not constantly agitate to have the BSkyB stake removed from his back, if only because the longer the Murdoch clan can delay the enforced sale the more likely it is that the recession will ease and the shares — now at about 60p — might move closer to the 135p per share BSkyB paid for them. There is no suggestion that Crozier is in any way at fault in this.
But the sceptics surely have a point when they question whether it is prudent for ITV to appoint a chief executive with such strong personal links to a director of a company dedicated to prevent the emergence of a stronger business rival, which more than any other factor has been responsible for its parlous condition.
