Backing finance or backing monopolistic waste?

 bad business, banking, big business, Britain, consumer banking, financial crisis, investment banking, Labour Uncut, small business, unclassifiable  No Responses »
Feb 082012
 
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Labour Uncut has a sad piece today on the subject of why Labour needs to back the financial services sector.  Sad because it’s clearly an example of a wasted opportunity.

The author of the article, a successful entrepreneur, argues a number of things which – as a very humble ex-worker in a bank at the eye of the 2008 storm – I really must take serious issue with.  He does fairly say, for example, that:

[...] it’s not just British bankers who are busy corrupting their national standards of decency and fairness either. The Spanish bankers are also at it, with Santander and BBVA dishing out eye-watering bonuses that will have many City types wondering what exactly their overseas brethren did to end up with both the weather and the cash.

Without mentioning that the new right-wing Spanish government has placed a €600,000 cap on the executive salaries – never mind bonuses – of those who work at Spanish banks which have received public funds over the past few years. 

He then goes on to point out that (the bold is mine):

It’s hard not to recoil when looking at the sheer magnitude of some bonuses and then the gap between top and bottom.

But here’s the problem. Words are powerful, especially on a subject as emotive as this. Attacking injustice is fine, but “bankers” has become a term of abuse that is applied without distinction and as a result ends up tarring everyone working in financial services.

And here I agree unreservedly.  I remember what it was like when a staid, boring and underpaid profession as my own – my remuneration was always less than the average national wage, even when for example I had responsibilities as complex as checking documentation for signs of potential money-laundering – became the kind of profession one simply didn’t admit to in polite company.  From being the glue which kept society together to a pariah on the face of the planet is not an easy series of steps to take.

However, it is when the author of the article under discussion goes on to say the following that I really take issue (again the bold is mine):

The UK is an acknowledged world leader in financial services. Just as in the past the UK was a leader in making cars, ships and textiles. Hundreds of banks and financial institutions from all over the world flock to Britain because it was and currently remains the best place to do business.

But there’s nothing that pre-ordains this will always be so.

If a future Labour government goes to war with finance in pursuit of a mythical rebalancing of the economy, the cost will be felt in the dole queues and in Britain’s international competitiveness.

As if these costs weren’t already being felt precisely because of the recent products, processes and behaviours of a financial services sector which – even now – tends to believe self-regulation would be the answer?

I have, in my job at the bank, witnessed the kind of waste that goes on in all large corporations.  From unhappy experiences in IT-system commissioning to dreadfully overpriced display units designed to improve internal communication; from a specialised computer mouse costing an arm and a leg, with the aim of protecting an arm and a wrist from the pain of repetitive-strain injury, to a plush hotel room in a city far away from home for a perfectly honest charity event everyone was too embarrassed at the time to properly publicise; from 50 percent bonuses for middle managers, whose job it was to implement opaque salary policies and end-of-year distribution curves designed to make objectives impossible to achieve, to unnecessary overtime payments for projects poorly managed and husbanded … these are surely not the signs of an industry which currently deserves our support.

Neither fair in remuneration nor measured in its ability to manage change constructively, the real customers of the banking industry happen not to be the personal ones like you and me … nor the sole traders … nor the small- and medium-sized businesses … but, rather, far more importantly, the managers at the top of the tree.

All the admirably good and hard work of the call-centre staff, the branch personnel and the sales people who suffer every day of the week means nothing in the face of the fact that these behemoths are evermore structured to make money for their leaders.

I agree with the initial thesis that we shouldn’t be bashing an entire industry simply because the people at the top are behaving without a single fibre of moral propriety.  And the solution to the problem can, perhaps, quite unconsciously, be found in this final quote (once again, the bold is mine):

Actions have consequences and the Labour leadership would do well to pause before endorsing policies that will scythe into one of this country’s truly world class industries. As with Britain’s past industries, it doesn’t take long to lose the edge and fall back.

The Labour party needs to take a deep breath and consider the hundreds of thousands of people whose jobs are at stake in finance. We need to remember that financial services have a key role to play in the future growth of all our industries. And most of all, we need to develop balanced and strategic policies for the financial sector, not simply hop onto the banker-bashing bandwagon.

“As with Britain’s past industries, it doesn’t take long to lose the edge and fall back.”  That’s a quote and a half – and should make us think far more profoundly.  What is it about British industry and its hierarchical structures which makes it so prone to the vagaries of elements beyond businesspeople’s direct control?

Cogitate on the answer to that one – and you may discover the way forward for our wider society.

A blame culture, ours?  It starts from the top.  Leadership is, after all, as I saw commented the other day, much more a question of providing the right kind of facilitating work environment than micromanaging people’s creativity out of existence.

Sustainable 21st century business surely requires people at the top to centralise far less their responsibilities on themselves.  This does mean, of course, that they will become less indispensable – and, therefore, cheaper to employ.  But until this is done, British business will continue to be at the mercy far more of government legislation and external factors than its own long-term and internal securities and structures.  Only when both power and earnings are transferred to the people who actually add daily value to a company will company culture and differentiation from the rest of the marketplace become more positively entrenched – and the impact politicians can have on the future health of a sector become, equally, far less significant.

Labour’s attitude to British finance shouldn’t be the key to improving the ability of the sector to perform, whatever the framework.  That key, instead, lies within the sector itself.  And if the market were truly free – as, indeed, I believe it should be – the sector itself would already realise this.

Whilst a monopoly of top executives continues to run the financial services sector in the UK, we will get a stream of complaints from these top-heavy and highly uncompetitive companies unhappy with the legislative and regulatory constraints of the British economy.

It’s high time they realised they need to sort out their problems by sorting out the way they manage their businesses.

You don’t need to pay someone million-pound bonuses to know how to cut the livelihoods of tens of thousands of workers.  For that kind of money we need far more imagination.

So up your game lads and lasses.  And transfer that power!
____________________

Update to this post: some background reading from the Guardian newspaper has just come my way – an interview with Stephen Hester from the Royal Bank of Scotland on the subject of the furore surrounding his recent bonus award.  It also provides an alternative viewpoint to some of the issues I raise above.  Well worth your time.


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The psychology of all this ring-fencing is totally wrong

 a con, banking, consumer banking, Guardian, investment banking, Vickers  No Responses »
Sep 122011
 
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The Guardian reports on Vickers today – and in particular in relation to the proposed ring-fencing of retail banking by 2019.  I’ve already commented on why the banks need eight years to be in a position to avoid the extreme consequences of another financial meltdown (not, note, however, the meltdown itself).  But I’d just like to add a further observation in relation to the psychology of this ring-fencing.  The Guardian first (the bold is mine):

Britain’s biggest banks are to be given until 2019 – longer than had been expected – to implement radical reform of their operations to prevent another taxpayer bailout of the system.

The Independent Commission on Banking – issuing its report almost three years to the day after the collapse of Lehman Brothers which led to the major 2008 bank bailouts – said that banks should ringfence their high street banking businesses from their “casino” investment banking arms.

Yet surely this is all just a little back to front; surely the psychology of all of this is just more than a little bit wrong.  Ring-fencing high street banking from “casino” investment banking, as Vickers is reported to be suggesting, is like capitulating to the need to create no-smoking areas instead of homing in on the polluters and ghettoing them.  It’s not the high street banking we should ring-fence but, instead, the “casino” investment banking which has caused all the problems.  It’s the latter we should isolate from the rest – not cast, by implication, aspersions on the good measured conservative stuff we should really want to promote.

Unless, of course, and only the experts out there can confirm this, there’s rather more of the “casino” stuff circulating round the economy than the politicians and bankers in the know either want to let on to or, indeed, can do anything usefully about.  And if the latter is the case, then, whatever Vickers does finally manage to implement, it’s beginning to look like painfully slow curtains for the majority of banking system users, who – in expecting a certain degree of salvation in the report – are about to get quite the opposite.


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Customer focus – and how the banks get it so right

 a con, banks, consumer banking, customer focus, customer service, investment banking, shareholders  No Responses »
Sep 122011
 
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Banks are about the most customer-focussed organisations I’ve come across.  Whichever the bank.  Wherever it functions.  And I should know.  I’ve worked in one.

There we are.  I’ve got that off my chest now.  I can breathe more easily.

“How so?” you may ask.  Indeed, this tweet makes the confusion pretty patent:

With all the speed of a £30 letter telling you you’re 5p overdrawn, banks won’t reform until, erm, 2019. Is this a joke?

Thus referring to the news today, in case you’d managed to miss it (snort), that, amidst “widespread acclaim” (the question “from whom” does linger a tad), the banks now have eight years to sort out the pretty mess they’d all previously landed us in.

And so back to the start of this post.  “Customer focussed?” I hear you splutter.  “Surely not!”  Well, actually – yes, they are.  The only problem – and real reason for all our misery – is that the customers in question are not the consumers who borrow or the savers who deposit but, rather, the shareholders who control through their short-termism and short-sightedness.

Want to know why the banks need eight years to prevent another meltdown, three days to make an electronic transfer and one morning to slap an overdraft fee on a hapless current account customer?

‘Cos, basically, banks truly are the most customer-focussed organisations in the world; and their actual customers, like no other customers in history, rule – with a veritable financial rod of iron – the entire behavioural and thus pecuniary landscape which lies, prostrate, before them.

No exceptions.  No remission.  No learning curve of any useful permanence.

Just the same old moneybags making the same old money go around in the same old circles for the benefit of the same old wealth.


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Free bank account? No thanks!

 a con, banking, consumer banking, free lunch, freebies, investment banking  4 Responses »
Sep 122011
 
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Whenever someone suggests that banks hive off their speculative risky arms into organisations separate from their safer more boring consumer relatives, the banks always threaten us with the thought that our “free” bank accounts will go out the window.

So let’s just see how the alternatives would stack up (without going as far as we could into the murkier realities of whether supposedly “free” bank accounts are really free in the first place):

  1. bank accounts with monthly charges – let’s say £130 a year
  2. a banking system for consumers like your old building societies used to be:
    1. cautious
    2. measured
    3. relatively conservative
    4. relatively safe
  3. reasonable economic growth
  4. reasonable job security
  5. a health service and justice system which was accessible to all
  6. reasonably priced learning opportunities for young people at both school and university levels
  7. support for disabled people which was aimed at providing them with a life of independence
  8. a cohesive society where people trusted each other
  9. an intelligent body politic where politicians and voters worked together to resolve problems
  10. a kind of seventh heaven in fact

Alternatively, we could continue as we are with those “free” bank accounts they’re always threatening to take away from us:

  1. no monthly charges if you’re in credit
  2. no job to pay the overdraft fees or interest
  3. no health service or legal-aid provision to support you in your case against work-related RSI
  4. no income on your savings
  5. no loan for your new business idea
  6. no wider consumer or economic confidence
  7. no state support for your disability or your carer
  8. no societal cohesion which doesn’t involve locking up the poor bad apples whilst leaving the rich bad apples to their own devices
  9. no political will to re-establish common bonds amongst us all
  10. hell

To be honest, I think you can see I’ve already made up my mind on this one.  Split the dangerous banking activities from the safe, make the big banks smaller and more focussed – and remember, please remember, that there’s no such thing as a free lunch.

Nor “free” bank account, for that matter.


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