The return of banking crises
Silicon Valley Bank’s collapse is the kind of classic bank run that regulations and regulators are supposed to prevent. But the US weakened the rules in 2018 and stopped stress-testing mid-sized banks like SVB – which is why the US is now considering reintroducing tougher rules for mid-sized banks. And why European regulators are fuming at the incompetence of US regulators and regulations.
The crisis then spread to other mid-sized US banks, particularly First Republic, which is still not looking secure. Then it became a truly global financial crisis after often-in-trouble Swiss giant, Credit Suisse was hastily (and cheaply) sold to arch-rival UBS, with Swiss regulators offering loans and other financial support to make the deal happen.
One main lesson for the UK is that it should think again about its deregulation of the financial sector. Another for central banks is beware the conflict between using interest rates to dampen inflation and the fact that rising interest rates are fuelling financial instability. Does this mean that central banks are engaged in class war?
With the bust of the smaller Signature Bank, some are wailing that there will be no one left to bank for crypto companies.
There’s more on regulation
The UK government’s ‘Big Bang 2.0’ plans for financial sector deregulation (the ‘Edinburgh reforms’) will increase the risk to the public, says the head of the Bank of England. And the regulators continue to warn that insurance reform plans (‘Solvency II’) will increase risks in the system.
What on earth is going on when the government’s City Minister is attacking the consumer duty – which the government itself is introducing?
Extinction Rebellion’s latest protest highlights how financial sector reform could be bad news for the climate. Here’s a detailed report setting out what we need to do to make financial regulation align with climate goals.
Good news – the Co-operatives Bill is passing through Parliament. It allows co-ops to hold some assets permanently in common, preventing the demutualisation for short-term individual gain that destroyed many of the UK’s building societies.
The UK Infrastructure Bank, an unambitious effort to replace the UK’s lending from the European Investment Bank (EIB), is only delivering a fraction of pre-Brexit lending.
Inequality, integrity and exclusion
In the past two years, the UK has prosecuted 80% fewer cases against financial institutions, accountants and others for enabling tax evasion than it did in previous years.
Here’s how the UK could do better at recovering funds stolen by kleptocrats.
One in five customers have to make an hour-long round trip to visit their nearest bank branch.
As banks make big profits thanks to rising interest rates, is it time for a windfall tax on banks?
Why on earth is the government cutting debt advice during a cost of living crisis?
Let’s not forget the climate
Find out which banks have the best ratio of investment in renewables compared with fossil fuels.
Short-termism gone mad: the Bank of England cuts work on climate change to save money.
How Germany’s debt cancellation could be a model for today.