Bernard Ginns: Banks ‘get away with it’ as commission misses a chance

Instead of going all-out for formal separation of retail and investment businesses to fully protect the taxpayer from future losses, Sir John Vickers called for a “moderate” combination of higher capital requirements and ringfenced retail operations.

“It’s this combination, that sort of moderate combination of the two strategies, rather than maxing out on total structural separation or indeed maxing out on super high capital requirements,” said the commission chief. “We don’t think it’s necessary to have total separation between retail and investment banking.”

Others might disagree, believing that casino banks with deposit-taking operations will still benefit from an implicit guarantee from the taxpayer.

“They’ve got away with it,” was the verdict of fund manager John Smith at Brown Shipley, “apart from Lloyds which might have to sell off more assets, but it could have been harsher and it wasn’t. There’s relief that it’s been in line with expectations.”

Of course, Sir John rejected criticism that the commission had been too weak in its findings, claiming that the proposed reforms are “absolutely far-reaching”.

But just look at the context and consider that this is an interim report, with the final report due out by September. Instead of taking a hard stance and then negotiating as and when, the commission appears to have ceded ground before the really heavy lobbying begins. No wonder bank shares rose during trading yesterday.

The financial crisis of 2008 was the worst since the Great Depression. Make no mistake, it was caused by bankers taking risks that they didn’t understand, ultimately backed up by you and me. A crisis of this magnitude needs more than just a “moderate” response. When the next catastrophe comes, we will know where to lay the blame for failing to fix the system.

n For Yorkshire to remain strong, it needs a strong corporate scene; that is, a concentration of medium and large companies which make decisions within the region.

Unfortunately, for a number of reasons, the number of influential firms headquartered here seems to be diminishing, anecdotally at least. Another slipped away quietly last month when its head office moved to Leicestershire.

Cleckheaton-based WorldEvents, a market leader in events in the healthcare sector and a past winner of a Yorkshire Post Excellence in Business Award, merged last month with UniversalProcon to form Universal WorldEvents. The new company is headquartered in Ashby de la Zouch, although the business still employs 100 staff at Cleckheaton, where WorldEvents was based. It is a small example of a bigger trend and something that all those with an interest in Yorkshire as a place should be concerned about.

The region needs a critical mass of decision-makers to give it clout on the national and international stage, particularly when it stands to lose hundreds of millions of pounds over the next few years from public sector spending cuts.

Iain Moffatt, senior partner in the Leeds office of accountancy giant KPMG, shared his view.

He told me: “We have seen a reduction in the number of major corporates headquartered in our region, partly through takeover or consolidation and partly through the desire of chief executives to live closer to where they increasingly spend most of their time – London or abroad and therefore requiring a hub airport. Neither will change I suspect.”

He added: “Retention of influencers and big hitters in corporates within this region will be helped by several factors combining together.

“Corporates will retain significant bases in the region if that is where the top talent wants to be; where they can get the best professional support, and if their business finds it beneficial to have significant operations in the region because of the business activity generally.”

This will be helped, he said, “by having the best universities, that are at the leading edge in fields that can be the cornerstone of business activity in the future, combined with a vibrancy in our local environment that makes it attractive for good people to stay in our region”.

Mr Moffatt said the public and private sectors should work together to identify and develop the industries that will flourish in the future. This, of course, is where the local enterprise partnerships can and should play a role. If they get it right, they can help stem the flow of decision makers – and wealth creators – away from the region.

n Finally, I welcome the programme by law firm Gordons to launch a new apprenticeship scheme for young people who might otherwise find it difficult to enter the legal profession. The Yorkshire law firm is making a bold move. I hope others take note and follow the example.