Morning:
14°c
Are we any further down the road to recovery in the banking industry? Ask me that question in a year's time, when we've finally come to realise the shape of this recession, and I will give you the answer.
The truth is that by then you will already know. We all will. If it's a double-dip, God help us. By then, RBS may be as good as dead and buried, requiring another £8 billion in new equity from the Government. Then, the attention may turn to Lloyds, which, fresh from signalling its ability to escape the Government Asset Protection Scheme today, found the going unexpectedly tough and, despite passing the Financial Services Authority stress test, had to be effectively nationalised after all.
All that is for the future but it's hovering, like a spectre, over the announcements made this morning. In some respects, we can take much heart from how far we've travelled since the credit crunch began. Then, it appeared as though all banks were going to be consumed. But that hasn't happened. Our two biggest banks, HSBC and Barclays, have stayed relatively clear of the conflagration.
Which leaves the next two in terms of size: RBS and Lloyds. Of course, there should have been five large banks, not four; and Lloyds should have been joining HSBC and Barclays on the A-list. But the Lloyds board thought they knew better and merged the Black Horse with the Halifax. Their ambition came at a price. Gordon Brown waived competition rules to allow the union but Neelie Kroes, the EU competition commissioner, saw different and has ordered divestment of some retail operations. Suddenly, Lloyds Banking Group is looking less super.
Yes, Brown and Alistair Darling should have seen Kroes's intervention coming. So too should the Lloyds management. But to be fair, the latter has been taken back by her determination. They're not alone. Stephen Hester of RBS has also endured some tough negotiations with the commissioner. The result in his case is worse: RBS is having to sell far more, the consequence of playing fast and loose in the boom years.
So Lloyds and RBS are to receive more public aid and with a handicap placed on them by Brussels. Having embarked on the bail-out, the Government has no choice. It's to be hoped this is the end. Whether it is or not only time, gulp, will tell.
