The news that the CEO of RBS is to receive a potentially substantial payout based on the company share price (with the caveat that it will be clawed back if it is felt to be more down to luck than judgment) raises some issues about the bets which have been made on our behalf in the name of financial stability. Robert Peston, speaking this morning on the Today programme quoted a potential profit of £8bn for the taxpayer if Stephen Hester achieves his target share price for RBS.
Now for me it is one thing to provide emergency finance to stop an economy going into freefall and it is quite another to seek to profit from that support even if the state of the public finances is as bad as it is in Britain. Already we have seen some differences in opinion between the Bank of England and the Treasury about the future ‘ideal’ shape of the banking industry between those who believe we need more strongly regulated behemoths and those who prefer a “[morally] good things come in small (and transparent) packages”.
Given it is the Treasury and indirectly the public finances which will benefit from the former we need to question how these investments are going to affect the long term political attitudes and policy towards the financial services industry and more importantly our private finances. Despite the best efforts of theCSFI (and others) to sponsor debate on the issues, a lot of the discussion seems to be taking place inside the establishment rather than in any truly public sphere.
I imagine that most people would find such a debate a turn off at the first instance, but I also imagine it would become much more interesting if it was couched in terms that “the people” could relate to – such as the nature of branch banking in the future, where we will go to get a pension, the aftermath of 25 years of miss-selling scandals, the need for innovation in the types of assets and accessibility of investment for the future. We need to get beyond Panorama style witch hunts and start thinking about the role finance and money is going to play in everyday life and what sort of banking we want to enable that.
I don’t doubt that elements within RBS (or any other of the leading banks) could lead that development with the right incentives, however, the current highly redacted debate is hardly one that is going to re-create public trust in the system which emerges.
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