Economy Committee calls for competition in Scottish banking
Mar 18, 2010
No Comments
Banks should never again be able to “hold a gun to the collective heads of the taxpayer”, a new report from the Scottish Parliament’s Economy Committee has concluded.
The report follows the committee’s recent inquiry on banking and financial services in Scotland, which was promoted following the multi-million pound taxpayer bailout of the Royal Bank of Scotland and the emergency merger of Halifax Bank of Scotland and Lloyds TSB.
Stating that more competition and diversity will be needed to ensure that the failure of any bank can never again endanger the country’s economy, the report recommends an investigation into the sector’s competitiveness with a focus on personal accounts, mortgages and business banking services.
On ensuring Scotland’s immunity to a repeat of the 2008 banking crisis, the committee states that a return to “Scottish principles of financial rectitude” is needed, as well as improvements to corporate governance and a stop to aggressive marketing techniques “driven by performance-related bonuses”. In an apparent reference to the current tight lending landscape, the report says that the role of banks and building societies should be to provide services to a range of consumers, stating: “Sustainable economic development in Scotland requires the support of banks in the form of lending to the real economy. The Committee therefore calls on the banks and building societies based in Scotland to consider their social utility and their broader role in Scottish society with a view to supporting sustainable economic growth.”
The committee has also raised concern about the detail of the Scottish Government’s vision for the growth of the financial sector and has recommended that the membership of Financial Services Authority Board (FSAB) should be widened to include members from a wider range of business and consumer groups.
Commenting on the report, committee Convener Iain Smith MSP said: “Banks are there to serve the economy. It is not for the economy to serve the banks.
"The financial crisis and the resulting recession have undermined the economic growth agenda in Scotland. The legacy of the crisis must be managed to ensure it never happens again. A sustainable financial services industry that supports the rest of the Scottish economy must be developed.”
Other recommendations from the committee were that the Scottish Government should look at: its relationship with the Bank of England, the Treasury and the Financial Services Authority; clarifying the business boosting role of the proposed Scottish Investment Bank; encouraging Scottish buyers for branches of Lloyds TSB and Natwest that are to be sold off and increasing consumer awareness of financial affairs through improvements in education.