There's No Good Time For Banks To Change

Retail bankers always fiercely resist change. I guess that's because they've always had to follow the manual. Unless the manual changes they are powerless to help. Add to this a general lack of accountability for the manual, and you have the perfect recipe for inertia. This explains retail bankers' resistance to faster payments, fairer overdraft charges, abandoning the sale of payment protection insurance ... the list goes on and on and on. It's cultural, regardless of their woeful economic plight.

So, of course, we find febrile resistance to the notion of 'ring-fencing' or other structural proposals to shuffle the deckchairs somehow prevent the need for massive taxpayer subsidies to keep retail banks afloat. Timing is always the last line of defence, and now we're hearing from the British Bankers Association that they couldn't possible restructure until never they've financed the recovery and repaid bail-out funds to the taxpayer.

I completely understand the concerns about restructuring banks amidst the current economic hurricane. But isn't the purpose of restructuring them to protect us against one of them being swamped? If so, surely now is the time to batten down hatches and secure the cargo as best we can.

Or should we simply be manning the lifeboats?

Image from gCaptain.

'Normal' Service Will Now Be Resumed

Apologies for the radio silence during much of August. Already frantically busy going into the holiday, I landed myself with the additional task of finalising The Book of The Blog by 1 September. Fortunately, the patience of family and friends allowed me to finish the first draft early and I emailed it from holiday in Spain two days before my laptop packed it in...

The enforced social media lay-off was probably no bad thing. While I stand by it, the scathing vitriol I poured onto Ryanair now seems to have been Tweeted by someone far less relaxed - though some good old-fashioned personal service from AutosEstrellas helped exponge the few hours of misery. I should also add that the easyJet experience was definitively better than that of its Celtic cousin, even if everyone now seems to be opting for 'Speedy Boarding'. One of the staff said they're considering a move to reserved seating, so maybe that's why.

For what it's worth, I wholly recommend the beaches around Begur, north of Barcelona, and Illetes in Mallorca, including Balneario Illetas for great food (and a consistently good blues mix). Others from 'downunder' will laugh uproariously, but that's European beaches for you, unless you're well off the beaten track or on a boat and can anchor where you like.

The 'find' of the past few weeks, if you want to push the boat out for a night, is the Restaurant Pa i Raim in Palafrugell. But I don't recommend the 10km run at 8:00 the next morning to pick up the car before the Policia Local swing into action. A taxi would do just nicely.

Image from Blogxiliar.

The Book of The Blog

Well it's no secret, but I feel a lot better admitting to it now I'm back from holiday and the first draft is safely in!

In a nod to convergence, Ash Rattan of Searching Finance, the economics and finance publisher, first got in touch via Twitter to suggest we meet in a more traditional publishers' forum in July. And, ready as I was to indulge in a traditional West End literary lunch that spilt late into the afternoon, I was equally impressed that our discussions required nothing stronger than coffee and that agreement was reached within a few weeks.

I could be wrong, but somehow I doubt an agent and several belts of the Bordeaux would've helped much in that process.

Anyhow, it seems fitting that the book of the Pragmatist blog should be published not only by someone who publishes an array of people for whom I have a great deal of respect, but who also disintermediates a few links in the supply chain along the way.

I hope you will enjoy the read in due course.

The Great PPI Robbery Redux

I must be missing something. UK banks are all reporting their profits and losses with separate adjustments that 'strip out' their massive provisions for mis-selling payment protection insurance in connection with their retail credit products over many years.

In other words, they suggest they would have been 'much more profitable' if they had not ripped off consumers.

But they did rip off consumers, and this damaged their profitabilty.

Worse still, their provisions do not reflect the fact that they used PPI revenue to cross-subsidise the marketing and sale of related credit products. So there was a false market in those products as well.

The point remains: will these banks continue to rip off consumers? Will there be more fines and more provisions?

Millions upon millions of fines and adverse findings in UK banks' recent history suggest we have not seen the last of their exploitative conduct.

And it would seem very unlikely that in the current economic environment these businesses will be capable of dedicating the necessary resources to ensure their processes and procedures are compliant.

We urgently need to figure out alternative sources of finance to our banks.

More Tea, Wolfgang?

The "Tea Party" may be getting it in the neck for its bumbling brand of brinkmanship over the US debt ceiling, but, as Schumpeter points out, it's the European finance leaders who seem not to realise the gravity of the current financial situation:

"Italy sold €8 billion ($11.4 billion) of ten-year bonds on July 28th but had to pay a yield of 5.77% to do so, the highest level at auction for 11 years. Making matters worse, European politicans have gone back to making unsettling comments after their brief show of discipline at the summit: Wolfgang Schäuble, Germany’s finance minister, said this week that he would not be writing any blank cheques to the euro area’s bail-out fund, the size of which is inadequate to ringfence Spain and Italy."