Eight years after the financial crisis, the Bank of England decided it was safe to invite outsiders to an “open forum” on financial markets. Regulators tend to welcome onlookers when they think they are doing a fine job and, sure enough, the governor, Mark Carney, set the tone by declaring the age of “heads I win; tails you lose capitalism” is coming to an end.
Up to a point, the boast is reasonable. There is greater confidence that taxpayers would not be on the hook in a repeat of a 2007-08-style banking crisis. Capital cushions are plumper; ringfencing rules and banks’ so-called living wills should make bondholders bear pain before the bill lands on the public purse.
The system has yet to be tested under fire – the only true measure – and bankers grumble that the search for resilience has created a new danger by removing liquidity from markets. But the new regime is plainly an improvement on the past; it could hardly be worse.
As for personal accountability in banking – well, the jury is out. It is alarming that the banking lobby has succeeded in watering down rules that would have obliged senior managers to prove they had acted responsibly. Parliament backed the idea after long debate; the industry screamed with fury and is getting its way.
But here’s the bigger complaint: whatever happened to the idea that strong financial markets require greater competition, not just better regulation? In the (understandable) desire to squash outrageous abuses such as the rigging of Libor and foreign exchange markets, the pro-competition agenda seems to have been shelved.
In the City, the princely fees charged by investment banks in rights issues and fundraisings continue to look like legalised extortion at the expense of clients and investors. On the high street, the Competition and Markets Authority delivered a report of astonishing timidity that would reinforce the current oligopoly – even hardened cynics were shocked. If we have to wait for new technology (trumpeted in George Osborne’s contribution) to improve matters, the race will be long.
The charge, then, against the regulators and politicians is this: the technocratic fixes – the stress-tests, the capital requirements, the ringfencing regime – are being executed well. But effective markets should also be competitive, and it’s hard to say we are even close to that in the financial world. Instead, there seems to be a new form of regulatory capture – a quiet agreement that greater resilience has been hard to secure so nobody will shout too loudly about the benefits to consumers of harder competition.
In other words, it’s good news that Carney’s coin is less weighted than it was, but the odds still favour the old order.
TalkTalk hopes to emulate Nike’s bounce
TalkTalk made an eye-catching claim in its post-cyber attack half-year figures. It said protecting customers’ data better, and rewarding loyalty, “will, in time, more than mitigate any lasting impact of the attack”.
More than mitigate? Really? Every threat is an opportunity, they say, but is chief executive Lady Harding suggesting that TalkTalk will be a net winner eventually? Yes, something like that. She argues that customers whose complaints are dealt with satisfactorily are more loyal. She offers Nike, once under fire for use of sweatshops, as a brand that responded to a crisis and emerged stronger, as TalkTalk hopes to do.
TalkTalk is not Nike, however, so let’s see if life runs so happily. Its recent history has been an admirable attempt by Harding over many years to shed a reputation for lousy customer service. It’s impossible to know how much good work has been undone. The £35m upfront cost is manageable, and giving all customers freebie upgrades is sensible, but the damage to the brand will emerge only when contracts expire – just the 4% of customers directly affected were allowed to cancel early.
Meanwhile, Harding is sticking to her medium-term financial targets but insists it is “too early to say” whether the promised 25% profit margin will arrive on schedule in the next financial year. That’s a cop-out, but a wise one.
Is boredom eating into supermarket profits?
Sainsbury’s 18% fall in half-year profits counts as a half-decent result for a supermarket chain these days. The old problems we know about – commodity deflation, discounters, internet shopping, etcetera. But the retailer’s chief executive, Mike Coupe, put his finger on another. In a reversal of 30 years of post-recessionary trends, grocery sales have not risen when disposable incomes have improved. Spare cash is going instead on eating out, clothes and holidays. We’re bored of supermarkets, as Coupe didn’t put it, obviously.
