Still paying for banks’ failure

But a side-effect of selling the branches to the Co-op would have been a re-invigorating of the banking sector through the introduction of much-needed competition.

The taxpayer, therefore, will be the loser several times over following Co-op’s announcement that it is not going to go through with the acquisition.

The advent of a further period of drift and delay means that yet more cash will be added to the piles of public money already wasted in setting up the Co-op deal. Meanwhile, hopes are dashed of a new bank challenging the cosy complacency of the so-called Big Four high-street institutions and the taxpayer has to wait even longer for any significant return on the billions ploughed into rescuing HBOS from impending collapse.

Indeed, five years on from the banking crisis, the sector is still failing to function properly, as shown by the Government’s decision to extend its Funding for Lending Scheme in an attempt to give more small and medium-sized businesses access to working capital.

It is, however, one thing to make such schemes available, but quite another to ensure that banks and firms actually take advantage of them. In a business environment in which growth continues to be elusive and confidence is sorely lacking – as will be exemplified today in figures showing how close Britain has come to a triple-dip recession – the appetite for either borrowing or lending is simply not going to be there.

All of which means that the Government has to think of more innovative ways of stimulating the banking sector into becoming far more dynamic.

There is an understandable need to curb banks from any temptation to return to their old reckless ways. But a situation in which burdensome regulations actively deter new players from entering the banking sector and giving it the shake-up it needs can only prolong the debilitating effects of the 2008 crash.