Then Martin Wheatley, the get-tough regulator at the Financial Conduct Authority who set a record for fining banks, was ditched last week. Whatever next? Could the banking ringfence, the centrepiece of the post-crisis regulatory reforms, be at risk?
In theory, the answer should be a definite no. The legislation requiring banks to erect ringfences around their UK retail divisions by January 2019 was approved by parliament in 2013. The Conservative party’s election manifesto reaffirmed a commitment to finish the job “to protect hardworking taxpayers from future banking crashes”.
The Bank of England’s Prudential Regulation Authority (PRA) is yet to determine the precise details of the ringfence but the big issues are meant to be settled.
“The PRA does not consider that the responses to the consultation necessitate major changes to its proposed approach to implementing ringfencing,” said an update in May. Yet the bellyaching from some banks grows louder.
The current and former chairmen of Barclays have argued for a rethink on ringfencing, pleading that it will be costly and is no longer necessary. HSBC cited the reform as a reason why it might move its head office out of the UK.
The bankers, it appears, also think they are making progress with their self-interested argument that a chancellor interested in growth should be less tough on structural reform. The Sunday papers are full of stories that the Treasury is considering softening the ringfence.
Osborne, let’s hope, will put a stop to this silliness. If he casts his mind back just a few years, he will recall that he backed ringfencing enthusiastically for two reasons that remain as relevant today as then.
The first aim of the ringfencing legislation is it to make it easier to wind down failed banks and save the parts worth saving – “exactly what could not be done in 2008 when Royal Bank of Scotland failed”, as Martin Taylor, a member of the Bank of England’s financial policy committee, said in a recent speech.
The second related ambition was to isolate retail banks’ balance sheets and stop the implicit subsidy from taxpayers to other parts of a broad banking group. That change, no doubt, could be expensive for a bank like Barclays – its investment bank, in effect, would have to stand on its own feet and find its own sources of capital, which might be pricier. But so what?
It is not the job of UK taxpayers to help ensure that Barclays’ investment bank can compete with its Wall Street rivals. Osborne should also remember that ringfencing was not a mindless piece of bank-bashing adopted on a whim. The reforms were proposed after lengthy debate and evidence-gathering by the Vickers Commission in 2010-11.
They were deemed vital protections for a country like the UK with an oversized banking sector.
Reform might also ensure that recovery after the next banking crisis is quicker – a case of fixing the roof while the sun is shining, as the chancellor might put it. As it happens, Osborne is appearing in front of the Treasury select committee on Tuesday, albeit on other matters.
It would be a good thing if committee chair Andrew Tyrie, a fan of ringfencing (in electrified form, no less), grabbed the opportunity to get an on-the-record pledge that the government remains fully committed to its flagship banking reform.
Travelling light Advertisement Travelodge’s financial performance seems to be improving, though it’s hard to conclude so definitively from a “results update” that bizarrely mixed a six-month revenue number and a 12-month profit number.
The company is privately-owned, and thus under no obligation to prepare audited half-year figures, but management is still allowed to use common sense. Travelodge’s owners – Goldman Sachs and a pair of US hedge funds – are looking to flog the business and may succeed in getting the rumoured £1bn.
The strategic masterstroke behind the claimed recovery was the decision to install beds that keep fewer customers awake. That task proved impossible to fund before a debt restructuring in 2012. But the hangover from the debt misadventure, the work of former owner Dubai International Capital, can still be detected.
In a normal world, one might expect Travelodge and arch-rival Premier Inn, owned by Whitbread, to achieve roughly similar revenues per available room, the industry’s key yardstick.
But even an improving Travelodge’s £35.87 is low against Premier Inn’s latest reading, £49.13. An optimistic spin might say Travelodge has plenty of potential to improve. If so, why are Goldman and the hedgies so keen to check out?
They “are not natural long-term holders of a hotel business” explains Peter Gowers, Travelodge chief executive. Maybe. Or perhaps the owners think peak valuations for hotels lie around the next economic corner.
theguardian.com
No comments:
Post a Comment