Member Article

Cable worried by continued fallout of banking crisis

Vince Cable says he is still concerned about continued damage to the real economy, created by the banking crisis.

Speaking to an audience at Bloomberg this morning, Dr Cable said that historically, the effectiveness of regulation has diluted over time.

The Business Secretary appeared sceptical that ring-fencing of the banks would work, stating: “There is a risk that, when the banks regain, as they surely will, their reputation for alchemy – for turning base metal into gold – they may be tempted to “game” the ring-fence, perhaps by constructing complex instruments.

“These instruments might technically be classed as retail banking products and – in practice – fail to respect the spirit of ring-fencing.”

Elsewhere in his speech, Dr Cable demanded banks lend more to SMEs, and said transparency over lending figures was needed.

He added: “Michael Fallon and I have contacted the banks demanding much more transparency: gross and net lending to SMEs, and overall lending, disaggregated to institution, branch and – preferably – constituency or postcode level.

“I’d be surprised and very disappointed if this information was not already available each week in spreadsheet form on every CEO’s desk, so that they can pursue poorly performing managers. And it should be shared, not just with Government – but with Parliament, which holds Government to account.

“We have already taken action in publishing banks’ use of the Government’s Enterprise Finance Guarantee scheme. In the absence of cooperation, we shall seek a regulatory solution.”

Dr Cable called banks’ claims that it is difficult to find credit-worthy business customers, “pathetic,” and said further work was needed to ensure the Government’s Funding for Lending scheme worked for SMEs.

On the introduction of a British business bank, he added: “Its purpose is not to hoist the large volume of business lending on to the taxpayer’s back – that is for the existing banks to deliver. It is to tackle market failures in the provision of finance, bring greater diversity and competition to those markets and ensure that businesses are aware of the support available from Government.

“There is a long recognised market failure in the supply of long-term patient capital to growing companies, and the Business Bank team is already developing products to address this. We are also bringing the various strands of Government finance under a professional management team, to be managed as a single portfolio with operational and budget flexibility.”

This was posted in Bdaily's Members' News section by Tom Keighley .