Instead of a firesale, reform RBS into local banks
June 16, 2015
Osborne’s reckless RBS firesale is a terrible idea, not only because of the £13 billion loss to the taxpayer, but also because doing so would miss an invaluable opportunity to fix Britain’s broken banking system.
British taxpayers are solely responsible for the bank’s survival, having poured over £45 billion into the bank when it was on its knees and begging for a saviour.
So as taxpayers, we are actually the main shareholder of the bank. But as the public, we’re also its main stakeholder too. We own RBS, so it should work for the benefit of us all – not just the few.
One proposal to make RBS work in our interests is to reform the bank into a network of local stakeholder banks, which only invest in the local economy and have a mandate to serve the public interest.
Significant research shows that this proposal would have huge positive impacts both socially and economically, as well as making us less vulnerable to future financial crises.
By only investing locally, regions and businesses would have more chance of receiving the credit they need, helping to rebalance the economy as well as creating jobs and prosperity outside of London.
Branch managers would also have the authority to make investment decisions based on relationships and their own expertise, rather than suffering from the “computer says no” syndrome that has come to characterise our high-street banks.
Secondly, not only would this improve opportunities for people outside of the capital, but it would also make the economy and financial system safer as a whole.
This is because there would be more diversity in the types of investments that different types of banks hold in the UK, whereas in the financial crisis too many massive banks had too many investments that were too similar – and worthless, it turned out.
A third benefit of reforming RBS into a network of local banks is that it would help include more people in the financial system. Everyone would have access to at least a basic bank account, whereas the current system often excludes those with bad credit history, driving and deepening poverty.
Local branches would also stay open, helping the elderly and those who like a personal touch in particular, whilst also avoiding “credit deserts” that occur in areas with no branches.
Better still, local people would be given more control over financial decisions that affect their lives and communities, because the local stakeholder banks would be governed by trustee boards that are open to public membership.
As well as improving peoples’ engagement with and control over the financial system, it would also avoid the dreaded political interference that has undermined other, different models of publicly owned banks.
So there are actually a number of compelling social and economic reasons for retaining and reforming RBS. At the very least, these proposals deserve serious consideration in an independent, public and transparent consultation.
Instead, we’ve had a biased review with a foregone conclusion, conducted in secrecy by a private bank (Rothschild) that may well benefit financially from the firesale – unlike the UK taxpayer. Essentially, they’ve said “you can have any kind of bank you want, as long as its private and shareholder owned”.
Returning the bank to private hands at knock-down rates merely guarantees business as usual for the banks – enrichment of the very few at the expense of the great many.
The UK public deserve better than that. Instead, we’re being excluded from the debate.
It’s time we forced our way back into it, and to make RBS work for us rather than just the few.