Before the polls even opened on Thursday, there was already a clear loser in the UK general election: banks. Regardless of which party takes power, it seems that UK bank earnings are set to be hit by a wave of new legislation that could result in a rising bank levy, ring-fencing of operations, and even capping of retail banking market shares.
To be clear, banks and individual bankers whose recklessness and criminal behaviour precipitated the financial crisis deserved to be punished. And yes, the government should play a strong role in ensuring economic stability and therefore has to keep an eye on the financial industry.
Some proposed policies aimed at banks suggest politicians have become irrational. How, for example, would a Labour Party proposal to increase the bank levy to support free childcare have prevented the next financial crisis? Tory plans to use the money from fines to create apprenticeships also suggest politicians are simply using this money for political gain. It’s no wonder then that the Institute for Fiscal Studies recently felt compelled to warn politicians against treating banks like a “cash cow”.
But still, banks have been remarkably silent when it comes to defending themselves against political attacks in the post credit crunch era. This is particularly surprising because many politicians were themselves complicit in creating the conditions that led to the financial crisis.
So perhaps it’s time for banks to change their PR strategy and speak up. Already there are rumblings: The Chief Executive of the British Bankers’ Association was recently quoted in the Financial Times reminding politicians that “Banking is by far Britain’s leading export industry, and one of its biggest taxpayers, but…it is very internationally mobile.”
But instead of running away, as HSBC and Standard Chartered have threatened, it would be refreshing to hear more about the value that the financial industry brings to the UK and how banks are working to prevent further bad behaviour. After all, the staggering fines paid by banks since the financial crisis are not just the result of overzealous politicians on a witch hunt – banking culture was clearly dysfunctional pre crunch.
According to the FT, most bank bosses recognize that the industry is not doing enough to convince sceptics it has changed. Increased transparency would be a step in the right direction since it would prevent people from coming to their own conclusions, which has been mostly that banks are still up to no good.
So it’s time for the banks to take back control of the narrative. Until now, it may have been easier for banks to remain silent and for the public to hate them, but in reality if the financial industry continues to be a political target the biggest loser in this election will ultimately be the UK economy.