TAXPAYERS SHOULD never again be forced to bail out troubled banks and the costs should be borne by bondholders and investors, the head of one of the UK’s largest banks and a leading British central banker told the Confederation of British Industry.
“No bank should ever receive taxpayer money,” said Bob Diamond, who will take over next year as chief executive of UK bank Barclays, which rejected government support during the financial crisis. Instead it was supported by Middle Eastern investors.
Mr Diamond went on to back strong global banking regulation. “Strong banks want strong regulation,” he said. But he rejected current opposition to large global banks, saying that 150 small banks had collapsed in the United States last year and 130 so far this year because they were dependent on local economic conditions. “There is no evidence that big is bad,” he said.
Paul Tucker, the deputy governor of the Bank of England, said bondholders should absorb the losses of future banking collapses.
Northern Rock, which was nationalised in 2008 when on the point of failure, would not be rescued today.
Spanish banker, António Horta-Osória, who leads Santander’s UK operations, said that banks should be allowed to fail, “without the taxpayer having to step in”.
Prime minister David Cameron who unveiled a growth strategy that was criticised for its lack of detail, said a “new economic dynamism” would be created to fill the gap left by more than £80 billion worth of cuts over the next four years.
Leading speakers at the CBI conference in London expressed confidence that the UK would not slip into a “double-dip” recession, though growth figures to be published today are expected to show that the GDP growth fell to 0.4 per cent in the three months to September 30th – sharply down on the 1.2 per cent figure achieved in the second quarter.
Newly elected Labour leader Ed Miliband, while saying he hoped the Conservative/Liberal Democrats’ strategy would work, stated that he feared it would not work. He also expressed concern that chancellor of the exchequer, George Osborne seemed not to have a plan ready to cope with a second recession.
“I do fear that the path the government is pursuing is a gamble with growth and jobs. They have a programme which will lead to the disappearance of a million private and public sector jobs but no credible plan to replace them,” he said.
