U.K. Schiller Institute correspondent Bernie Holland reports that Chancellor of the Exchequer Jeremy Hunt has announced new banking reforms designed primarily to enable the failing institutions of City of London to compete more effectively with their European counterparts.
Let us go back to the 2008 financial crash, at the center of which was the scandal of the Royal Bank of Scotland. It was the biggest financial time-bomb in history and it needed to be defused. When Steven Hester took over as chief executive of Royal Bank of Scotland (RBS) in October 2008, and as £45 billion of taxpayer money was being pumped into the business, the once-proud Edinburgh-based bank was on the brink of an implosion that could have brought down the U.K. economy with it.
Its assets were £2.2 trillion—more than double the size of the economy—and it was running out of cash. Unlike the queues that formed outside Northern Rock branches a year before, this was a less visible bank run: Major banks and companies were withdrawing money from RBS at a ruinous pace. It ended in the biggest bank bailout in history and a massive restructuring.
Evidence has since emerged of a government agency’s role in the Royal Bank of Scotland’s controversial Global Restructuring Group (GRG). The U.K. Asset Protection Agency influenced GRG’s strategy including decisions that determined business customers’ fortunes. More than 16,000 small business customers were transferred to RBS’s Global Restructuring Group. GRG was found in a leaked official report for the Financial Conduct Authority to have mistreated thousands of business customers. Perfectly viable businesses had their assets effectively confiscated under this fraudulent restructuring scheme.
After the 2008 crash, a number of reforms were initiated to push back against the culture of speculative “casino” banking. One was the “Senior Managers’ Regime” which was implemented to bring about more responsible behavior by those working within the investment banking sector. Banking practices were ring-fenced to protect the interests of smaller investors and customers.
