Britain must “move on” from bashing bankers and create a more useful relationship with the financial services industry, the former group finance director of Halifax Bank of Scotland has told the Yorkshire Post.
Mike Ellis said that banks have a vital role to play in supporting small and medium-sized businesses and helping first-time buyers.
“You have to learn from the experiences but... at times I think it may still be more popular to criticise banks for what they don’t do than actually work with them to make sure they do make a contribution,” said Mr Ellis.
“The dialogue needs to be more constructive. I’m not trying to excuse or reinvent the past.”
In an interview with the Yorkshire Post, Mr Ellis said that better macro-economic management of the kind planned by Bank of England could help prevent future crises by “taking the punch bowl away” during boom times.
“But it’s very difficult when homeowners are getting fantastic deals [and] everyone wants to own a property,” he said.
“It’s very, very difficult for anyone, even the Government, to turn around and say we are not going to lend.
“I have to say that as a society – politicians, media and everyone – at that stage they would be critical of the banks for not lending.
“It’s a very difficult thing to do: take the punch bowl away when the party is flowing. But we need something like that.
“This is not just the UK; it could be Greece, Italy, the United States. When it all looks too good, it typically is.”
Mr Ellis has been a key figure in the UK financial services industry in the last two decades, holding senior positions at Halifax Building Society, Halifax plc and Halifax Bank of Scotland, Britain’s biggest lender.
He declined to discuss who should bear responsibility for the collapse of HBOS, which needed taxpayer support and rescue by Lloyds TSB in early 2009.
The enlarged group recorded a £24bn loss in 2009, mainly from commercial property loans made by Bank of Scotland, and has axed 29,000 jobs since the takeover.
Mr Ellis said: “At the end of the day, if you look at what happened to banks and the financial services sector more generally, you would say the banks themselves, you would say regulators, you would say Government.
“We all rather enjoyed when money was easy to come by and you could provide funding to retail or commercial customers and ultimately when the markets ceased to function properly that was not sustainable.
“It’s popular to pin it all on the banking community and the banking community has certainly got to take its share of responsibility but it wasn’t all down to them.
“I do think they should be part of the solution going forward.”
Mr Ellis left HBOS in 2004 and returned in September 2007, resuming the group FD role from January 2008 to January 2009.
He maintains that the boards of HBOS and Lloyds TSB “took the right decisions at the right time” regarding the takeover. He declined to comment further on the transaction.
“The time is to move on and enter into constructive dialogue with financial services so they can play their full role in helping the economy move forward. I don’t think looking back would help,” he said.
The Financial Services Authority is continuing its enforcement investigation into the failure of HBOS.
On the economic outlook, Mr Ellis, 60, said there is more uncertainty now than “ever seen before”.
“The euro crisis adds a totally different dimension,” he said. “I don’t think anybody knows how the euro crisis will ultimately be resolved and I think that’s exceedingly important to the entire world. I would like to see a very managed process because the alternative of disintegration doesn’t bear thinking about.”
Aside from the “massive elephant in the room” of Europe, he said that the ongoing reduction of indebtedness points to suppression of demand in the UK economy, which will “bounce along the bottom”.
“It’s difficult to see what circumstances would give rise to a significant rebound, even ignoring the euro crisis,” Mr Ellis added.
“While it may all sound doom and gloom I think if we can achieve a more balanced economy, we will come out of it better and more resilient in the future.
“I think there will be opportunities for people, for companies, for financial services and everybody to play a part in it but it’s going to be hard work and tough on a lot of people.”
He joined Skipton Building Society as non-executive chairman in May.
Mr Ellis said: “For any financial services company, it’s going to be a difficult market environment.
“If you have rising unemployment, there are customers who are going to be in more difficulty than they otherwise would have been.
“There isn’t much growth in the economy therefore you have to have regard to what’s happening to personal disposable incomes and people you are providing services to.”
He added: “Skipton is a financially strong building society. It is one of the few institutions that has made profits throughout the period.”
Support for ring-fencing
The Government yesterday gave its formal approval to plans to ring-fence the country’s top retail banks from their riskier investment banking arms, in order to give better protection to taxpayers in case of future financial crises.
“The Government will separate retail and investment banking through a ring-fence,” Chancellor George Osborne told parliament.
Mr Osborne was giving his formal approval to plans laid out in September by the Independent Commission on Banking (ICB), which had proposed this ring-fencing model.
The ICB also said banks should hold core capital of 10 per cent, plus a further 7-10 per cent capital in the form of ‘bail-in’ bonds.
There would also be limits to the extent to which a bank could use money in its retail arm for its investment bank, a move that will increase funding costs for UK lenders.
Mr Osborne added: “It’s important to know that this ring-fence will not prevent banks from failing, but it does mean, if banks get into trouble, those elements of the banking system that are vital for families, businesses and for the whole economy can continue without resort to the taxpayer.”