Vickers has done for banking, now we must tackle pensions!

A very quick take (it's my day off) on the Government's announcement over the weekend that it intends to implement 'in full' the recommendations of the Vicker's Commission on Banking.

In effect this means we are having a 'Glass Steagall-lite' ringfencing of investment banking from retail banking in the UK.

Two points. Firstly, this is welcome news (well, not for the banks but the rest of us should be happy!) but the worry is that full implementation does not start until 2019. Plenty of time for the influential banking lobby to try and water down the proposals. This Government (or for that matter any future Government) must stand firm.

Secondly, the Observer's story yesterday concerning a leaked powerpoint presentation for the Government put together by Dr Christopher Sier, which details the secret fees being charged on pensions contributions is, to say the least, alarming. Apparently, "the charges are spreading and are so steep that savers may find they get less back in retirement than they invested in savings accounts and pensions over their lifetimes."

All this proves that it is not just those involved in trading complex credit derivatives that need to be brought into line.

UK Manufacturing: Suddenly it’s sexy again!

Take a look at the advertisement on the right. Now look again. No, your eyes are not deceiving you, this is actually an advertisement taken out by a financial institution to boast about supporting an SME manufacturing business based in the North of England!

What’s more it’s a true story, will wonders never cease? I wasn’t aware that most banks knew where Rochdale is let alone would actually support a business based there!

Fair play to GE Capital on this one, where most banks fear to tread they’ve gone in and backed a British manufacturer when far too many doors in our big UK banks are at best barely ajar and at worst are slammed in manager’s faces, despite the assurances given with Project Merlin.

What’s more GE Capital are telling the world about it with a series of advertisements. In fact this one is running across national newspapers including the FT, business publications and regional newspapers. It is next due to run in the Birmingham Post on 7th July.

If anything proves the extraordinary performance, resilience and all round “just get on with it” spirit of British manufacturers surely this it. As John Hanson, son of the managing director quoted in the advertisement, told me yesterday: “People want to know us [manufacturers] again. We’re hot.” Yes, even the banks!

What next for the banks?

The positive financial news from the banking sector which has come out over the last few weeks (Barclays 8% rise in first half profits, Goldman Sachs making record amounts of dosh) certainly seems to suggest that the sector is beginning to get back on its feet. It is certainly going to take a little longer for the worst cases to record performances like that, but it is clear that we can now begin to focus on the medium to long term futures of our failed banks rather than worrying about whether they are going to announce another £20 billion or so in asset writedowns.

In fact, my back of a fag packet calculations would suggest that, at current market prices, the Government is set to make a tidy profit on its shareholdings in Lloyds (43%) and RBS (98%). The question now is: how and when does the Government sell its shareholdings? The answers are ‘very carefully’ and ‘not yet’. Certainly pumping that amount of stock into the market in one go is out of the question so we are probably going to see a drip, drip of placings with institutional investors in the secondary market over the next 3-5 years.

You can’t help but wonder though whether a more equitable arrangement would be for those that saved the banks to truly benefit from the upside, namely you and me. What about a return to the privatisations of the mid-80s and an invitation for us all to fill our boots like we did with the British Telecom and British Gas? We could even have a “Don’t tell Sid” TV advertising campaign updated for the new millennium.

It would certainly make for a very populist policy for any political party to take into the next election campaign and would seem to sit very well with the Conservative Party’s publicly expressed aim of breaking the link between retail and investment banking.

Oh and there’s another very good reason to go truly public and have oiks like me at their AGMs - the banks would hate it!