Why the clouds surrounding the banking industry may be starting to shift

Anthony Browne
Follow Anthony
YOU COULD forgive me for being a little nervous at the prospect of the party conference season. Bankers have hardly been flavour of the month at these political jamborees in recent years.

And at all three parties’ annual get togethers, there have previously been vocal elements unafraid to let rip at our industry – at times with good reason. When I left for the first conference in Glasgow, however, it was with a touch of trepidation, but also some optimism. The clouds surrounding our industry are starting to shift for a number of reasons.

We have seen the start of the unwinding of the taxpayer’s stake in the state-rescued banks – an important landmark. The Parliamentary Commission on Banking Standards has also published its long-awaited report. The recommendations are exacting for our industry, but we will work closely with government to take forward the constructive proposals put forward. This will put in place the next piece of the new financial regulatory system introduced after the events of five years ago.

Cash bonuses have fallen by as much as 90 per cent, and many of the executives associated with the crisis have long since left the scene. But most importantly of all, the macro-economic picture is improving. Mortgage lending is rising and there are growing signs of increased confidence on Britain’s high streets. This may not be the runaway growth of the past decade, but growth is growth.

So there are grounds for optimism, but no one in our industry should be under any illusions. There is still a lot to do. Yes, there has been great change – but this is a process that is far from over. After all, the industry did not escape the party conference season unscathed. Labour announced new policies to be funded by higher taxes on banks.

And while speaking on panels at all three conferences, it was clear that many people still hold the view that banks are simply not lending to small businesses. But that’s not the whole story. Research shows that businesses are twice as likely to get finance than they would think. Approval rates remain high – at around 70 per cent. As an industry, we need to do more to get the message across that we are in the business of lending. At the same time, we have to remember that not all firms have the appetite to expand and apply for credit amid the early stages of the recovery.

Despite signs of growth, business confidence will remain brittle until there are more tangible indications of a recovery. There are ongoing concerns about the willingness of large firms to spend and hire, for example. Of course, part of this reticence stems from the global picture. Recent events in Europe and Washington hardly inspire confidence. Meanwhile, the clock is ticking for agreement over new EU rules to ensure that failing banks do not need to be propped up by taxpayers in the future. We only have a few months to settle these crucial rules before European elections end this parliamentary term.

We have not been short of change and more is afoot. But hopefully there will be plenty over the year ahead to make me feel less wary of next year’s conference season.

Anthony Browne is chief executive of the British Bankers’ Association.