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L&G boss says bank bashing will force lenders out of UK

Legal & General chief executive Nigel Wilson has warned banks will be forced to base themselves overseas if the bank levy continues to rise.

The Telegraph reports that Wilson is concerned that the future government needs to focus on the productivity of banks, rather continuing the current “bank bashing” going on today.

He said: “London is a great city and we want to increase our share of financial services, but we need to be careful. Royal Bank of Scotland is shrinking its footprint, as is Lloyds; TSB is about to be taken over. The premier league American banks feel they need to be large to compete in the long term with the Chinese.”

Wilson goes on to say there should have been more in the Budget to encourage investment by institutions.

He added: “Companies and the Government are underinvesting. Bank bashing has a perennial political attraction, but incentivising companies, including banks, to deploy stockpiled cash productively would have a far more positive effect on the economy than repeatedly going back to the well to extract funds through the bank levy.”

Wilson described the levy as “a move which ultimately risks forcing banks to relocate outside the UK.”

Last week in his Budget speech, Chancellor George Osborne said the UK banking levy would increase from 0.156 per cent to 0.21 per cent, which is expected to raise an extra £5.3bn over the next parliament.

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Comments

There are 19 comments at the moment, we would love to hear your opinion too.

  1. This will be the same Telegraph which didn’t cover the HSBC story because HSBC are a major advertiser and whose journalistic integrity has been compromised forcing Peter Oborne to quit?

  2. Sorry Bollock!

    My response to that if I was the government would be “don’t let the door hit you on the way out”.

  3. I agree with Nigel Wilson. The one things this country does so very well is play the “blame game”. Lets remember politics and regulation played a significant part in the US led banking collapse and in turn the UK banking collapse. The Clinton administration boosted the Community Reinvestment Act, a program to promote home ownership by the poor, which in fact was a vast regulatory extortion scheme against the banks.

    In order to continue to trade banks need to maintain capital adequacy, which is the ratio of a bank’s capital to its risk. Securitisation is used as a risk management tool. Once their debt book reaches a certain level, debt must be unloaded, divided into tranches and sold off. Quite simply without this facility banks cease to trade. The collapse in 2008 was a result of a market permeated with junk bonds pregnant with unknown debt liability. The fear that this debts could never be paid off triggered the loss in confidence in the markets.

    So lets not blame the banks. Its the system at fault and we are all part of this system. Consider how many consumers sold out their mutual status in anticipation of a cash bribe and conversion to banking status. The UK banking system is the envy of the world so lets not force it into the hands of our competitors.

  4. I agree with Nigel on this to a large extent !

    The financial rape, and continual bashing of the financial services industry (banks included) have just got to stop ! (IMHO)

    From my own little world, I find it very difficult (nigh on impossible) to forward plan anything, higher levies, ad-hoc levies, continual rule changes, I don’t know what’s going to change for tomorrow let alone 6mths, 1 year, 3 years down the road.

    I am not excusing the banks or any other part of the financial services for past troubles, but something has to give, the dam is at bursting point (I know mine is) !

    Any-one who can see past the end of their nose, knows George is trying to win votes, but the one question people should be asking at what cost ?

  5. I agree with DH….

  6. I say good, they don’t actually produce anything anyway but continue to take millions out of the pyramid scheme they created. It is about time the UK got back to production and left this sham behind because it is always destined to fail at the expense of normal UK workers who do produce either products or service.

  7. @Steven Balmer | 23 March 2015 12:15 pm

    You say: “….good, they don’t actually produce anything anyway”

    I do have reservations about the banks but being a realist I’m also afraid that views such as yours will drive the UK economy backwards.I would be interested in seeing how you would run the UK economy, industry, overseas trade etc without the UK banking system. In the decade before the financial crisis, the UK financial services sector grew more than twice as fast as the UK economy as a whole. We must not risks the export of our banking system to foreign competitors.

  8. Simon, I have a philosophical issue with the whole of the UK economy. Who does it economise for? What wastes do our current policies avoid? It is not the average UK citizen who benefits and the banking industry I say again, produces absolutely nothing. With the advent of computerisation and mechanisation, it is only a matter of time before unemployment and energy use demand a change in attitudes. The fact the financial sector grew twice as much as the rest of the UK economy is a dire consequence of maintaining an illusion that global banking is responsible for growth, it is not…..people and what they produce or do are. There are far too many highly educated people on here that refuse to see the wood for the trees and it is frustrating to listen to. Self interest rules the day as this is the British way. I have no interest in preserving UK banking systems as they take focus and money away from what truly needs to be addressed.

  9. Simon,why is it that Bankers blame the system when the system is made up of people?

    At some point people in the system have to take responsibility for what they did instead of blaming an invisible system.

    The FACT is that not one major Banker is in jail and not one has lost his or her millions and that is why the general public are so anger.

  10. Simon, I have a philosophical issue with the whole of the UK economy. Who does it economise for? What wastes do our current policies avoid? It is not the average UK citizen who benefits and the banking industry I say again, produces absolutely nothing. With the advent of computerisation and mechanisation, it is only a matter of time before unemployment and energy use demand a change in attitudes. The fact the financial sector grew twice as much as the rest of the UK economy is a dire consequence of maintaining an illusion that global banking is responsible for growth, it is not…..people and what they produce or do are. There are far too many highly educated people on here that refuse to see the wood for the trees and it is frustrating to listen to. Self interest rules the day as this is the British way. I have no interest in preserving UK banking systems as they take focus and money away from what truly needs to be addressed.

  11. @Peter Herd | 23 March 2015 3:36 pm

    Of course, a breach of civil law (as this might be) would not carry a prison sentence and if there was a breach of criminal law then The Crown Prosecution Service (CPS) would be the principal prosecuting authority together with the police. It is an over simplification and all too easy to be a barrack room lawyer and demand justice and individual scalps but if you over regulate the banks they will do as many manufacturers have done – relocate overseas! Where do we stop?

    Indeed, I think the banks could learn a few lessons from politicians who have allowed a system where 6.09 million 34 per cent of Britons work for the state out of working population of circa 20m. Public Sector spending now accounts for 53.4 per cent of gross domestic product (GDP) and all funded out of taxation – an expenditure that dwarfs banking malfeasance, tghe cost of which will be passed onto generations of tax payers yet to come!

  12. I agree that a healthy banking system is in our best interests as an economy, it is when they take unacceptable and uncontrolled risks that we should all be concerned, it is not their money or futures that they are gambling with. Complex financial instruments created by banks ensure that they get paid in the good times, and someone else loses in the bad times.

    This needs an efficient regulator, and I am sure that the FCA are keen not to repeat the failings of the previous acronyms.

    Of more concern to me is the increasing number of overseas corporations that are filling their coffers without making any discernible contribution to our economy, yes they employ people and use local services, but the tax revenue from individuals is a drop in the ocean compared to the massive corporate profits they enjoy.

  13. Simon What you are saying is that two wrongs make a right – is it no wonder there is so much bank bashing.

    I will ask you one question?

    What is the difference between LIBOR rigging and a person doing ID fraud?

    Personal I would change EU banking law to stop those banks going offshore and having access to EU and US capital markets. Maybe that would stop the blackmailing!

  14. If at least 5% of market transactions are fraudulent and now algorithms benefit corporations with the fastest access where do human beings come in? I am not talking about banking executives but ordinary workers who pay for the corruption through increased taxation, higher interest payments and poor returns on savings. The systems are now such that no one individual or group has a true understanding of global investments and it is a farce to say as a financial specialist you do. It has all become just varying degrees of fraudulent claims which includes the regulator, BofE and probably all other financial institutions. Society deserves far more and to maintain the UK banking system as some sort of savior or protector of UK individuals well-being is laughable. Modern financial institutions are not long standing and can change, must change. Sometimes society makes small mistakes and sometimes big but it is insane to keep pressing ahead with the same bubble system because it is the easiest thing to do – the current banking system is not sustainable, increases financial inequality and hurts society. This is why it is best to let corruptions fail, overseas banks leave and get back to production and increasing standards and equality of life for all. This requires a change in attitudes and is why I do not think that self serving fear mongering concerning banks is helpful.
    Simon, I think you know this is true or you would not be adopting avoidance techniques by changing topic. I don’t mind you thinking me a Utopian nut; I would be interested in your thoughts.

  15. Good Mortgage Man 24th March 2015 at 10:48 am

    We have sold England off by the pound over the last few decades. We need to strengthen our manufacturing base, as that is the greatest potential area for growth. You only have to look at Germany and what they achieved after the Second World War. They certainly did not achieve their growth through banking or financial services. We need to make, build and produce actual things and export them all over the World. That was our strength traditionally and that should be our strength in the future.
    If we rely on banking to save us, then we might as well give up now. And if large corporations want to operate in the UK, but not pay any taxes, then throw them out. If foreign banks threaten to leave, let them go. I agree with Steven Balmer. He is not a Utopian nut, but rather a practical man with a common sense view of our economy and place in the World. Look at Greece for the worst case scenario. They export around 6% of their GDP (a healthy economy exports around 30%). 70% of their work force was employed by their own Government. They do not make, build or produce anything than anyone wants. They will NEVER clear their debt in 200 years. Let them leave the EU, it will be their best chance of survival. We need to get back to what we are best at. We have some World leading companies in so many areas like technology and science, but we allow them to be bought by foreign companies, because we don’t have the right protection in place for them. That cannot happen anywhere else in the World, except here.
    We need a fundamental change and of course we need banking and financial services, but not at the expense of industry in general…

  16. @ Peter Herd | 23 March 2015 6:49 pm

    Questions: “What is the difference between LIBOR rigging and a person doing ID fraud?”

    Peter I do agree with you that crime needs to be stopped no matter where it occurs and that criminal prosecutions should be taken where evidence exists – but this should be applied to all – not just banks. What we need to be careful about is creating an anti banking (scape goat) culture, ignoring many other factors.

    I don’t recall anyone suggesting that the former head of the FSA should be prosecuted under ML regulations following the acceptance of £300K from Gaddaifi by the LSE – do you? This was in spite of Amnesty International evidence listing at least 25 assassinations between 1980 and 1987’s and of course worse to come.

    There are many people who are politically opposed to a capitalist system and have an anti banking agenda. They plot to undermine our structures and care not for the consequences for our economy. Of course banking has good and bad elements but please lets be realistic and apply the moral high ground to “all” that want to occupy it.

  17. Contractually anon 24th March 2015 at 12:15 pm

    It would probably help societies understanding if ‘bankers’ was not a generic term without considering the detriment and the value created by different industries within the banking sector.

    There is an element of deplorable activity within financial services, and within specific financial services sectors. I strongly put myself in the camp of wanting to see rigorous controls on various parts of the industry, wanting a separation between retail and investment banking and, if the law cannot in its current guise prosecute the fraud that has taken place, having the law changed.

    However, I would go so far as to say trial by media, and populist but uneducated/inaccurate attacks on a sector as a whole are more damaging than the pernicious activity that went before it.

  18. @Steve Balmer and GMM – I understand where you are coming from and your frustratiuon. The risk of extreme change is something akin to the Red Terror following the Menshevik and then Bolshevik revolution and what followed with Stalin. As GMM says, after an awful end to the second world war, (West) Germany by the 70’s was in a much better position than the UK.
    The UK banking system certainly is NOT perfect, but do we want to see a system torn down with extreme short term pain for long term gain or do we want to see a slower transition?
    Personally I prefer the latter and I do think that our two house system of government for all that it means things move much slower than elsewhere on the continent has had it’s advantages in the last 100 years.
    Lets not throw the baby out with the bathwater, which I think is what Simon Mansell is trying to say too.

  19. Phil, If the same energy used during the great wars was applied to revise existing outdated and unfair systems not only would the UK be a far better place, the world would. I completely agree that slow progression is far better for many reasons but discussions must take place in order for rational change to occur. I wish to engage in thoughtful discussion regarding all UK citizens interests and not just those in finance. To my mind financial services they have taken far too much and sold a false prophecy instead of production. I cannot stand to hear bankers moan about a 0.05% transaction tax increase when effectively it is only financiers who really care, most people have other issues such as low job security, house price failures, rising unemployment, disproportionate tax costs, soaring energy and waste costs….the list goes on. I know this is a finance page but does anyone feel a responsibility to point out this is a fools errand we are on anyway? Let bankers leave their multi-million pound employments for overseas and keep the hard earned money for those far more deserving. It is a lie that we cannot survive without them, most UK residents lives would flourish in a better designed fairer system that started to put repairing financial inequality at the heart of financial services.

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