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Politics poses the biggest risk to banks

Political interference is the greatest risk facing the banking ind-ustry, according to the latest Banking Banana Skins survey.

The global survey, conducted by the Centre for the Study of Financial Innovation and PricewaterhouseCoopers, ranks the top 30 most serious risks to banks. Respondents say the “poli ticisation” of banks as a result of bailouts and takeovers poses a major threat to their financial health. This is the first time that political interference has app-eared on the survey in 15 years.

Credit risk comes in at number two followed by too much regulation. The poll is based on responses from 450 senior figures from the financial world in 49 countries.

The perceived risk of hedge funds has fallen from number 10 to 19 since 2008 and environmental risk is unchanged at 25 despite the heat generated by the Copenhagen Summit.

Survey editor David Lascelles says: “It is ironic that politics should emerge as a risk when the banks had to be rescued in the first place. But there is clearly a crisis in the relationship bet-ween banks and society and it will take years to rebuild trust. Until it is, banks will operate under a financial handicap.”

PricewaterhouseCoopers UK banking leader John Hitchins says: “With political interference the top risk and too much regulation at number three, the concern is that the financial crisis has taken the banking industry’s future out of its own hands.

“The dash by governments to rescue their banks from disaster may have staved off a collapse of the system but it has left attitudes to the banking industry deeply politicised. A proportionate response is needed to avoid damaging the banks’ long term capacity to return public funds and enable them to play their essential role in the wider economy effectively.”

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