Don't forget the consumer, chancellor!

by Ed Bowsher on 17 June 2009  |  2 comments
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Alistair Darling needs to protect bank customers as well as shareholders.

Alistair Darling is making a big speech on bank regulation tonight.

Apparently he will reject any suggestion that bank regulation and bank culture don't need to be changed. According to the FT, he will say: 'Anyone who thinks that we can carry on as if nothing has happened should think again.'

In particular, Darling will say that quality of banks' boards needs to improve. Directors should focus more on long-term stability, less on quick profits. The chancellor will also reject Tory proposals to break up some of the larger banks - especially Lloyds/HBOS.

I think it's good that Darling wants to change the culture of bank boards. But there are two things that worry me about the speech - based on the reports I've read so far.

My first worry is about bank competition. Too few banks means less competition and bank customers will lose out. I wouldn't say that Lloyds/HBOS should demerge next month. But it's something that should happen in the next two or three years. And we should certainly consider further bank break-ups.

And that leads onto my second concern. We shouldn't forget that that the banks have been happy to rip off consumers on many occasions in recent years. Unfair bank charges, PPI, negative payment hierarchy are just three examples.

As things stand, the chancellor appears to be focusing on the overall health of the banking system as well as bank shareholders.

Those are both worthy aims but Darling should also be thinking about regulatory changes that will protect the consumer. Even if he isn't thinking about such changes, I certainly am. I'll say more in the weeks ahead. Watch this space....

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