Slowly, very slowly, and reluctantly dragging its feet at each stage, the UK Government is beginning to get it on the banks. Lord Myners’ hosting a G7 summit today in London to consider some serious options for international banking regulation would have been laughed out of hand a year ago, but of course it remains to be seen whether this is simply a showcase to capitalise on detestation of the bankers in the run-up to the election or whether it is more than a talkshop and delivers some real reform. The auguries are not good. The UK Government has rejected separation of investment (casino) banking from commercial (retail) banking on the grounds that higher capital ratios plus ‘living wills’ (to wind themselves down in the event of collapse) will suffice. They will not. The UK Government has rejected Obama’s proposal to clawback a large part (£56bn) of taxpayers’ funding of the bank bail-outs on the grounds that the UK tax on bankers’ bonuses (which will raise £3bn at most) will have an equivalent role. It will not. The UK Government made it a condition of the bail-outs that lending to businesses and homeowners would be maintained at 2007 levels, but then never enforced it. It has since collapsed to the lowest level for decades.

Now at last Myners is proposing either a global insurance levy or ‘innovative contingent capital instruments’ (whatever that might mean) or a global transactions tax. Some may see this, with good reason, as camouflage to protect flank against the charge that Britain should be following Obama’s lead in making the banks pay back at least a decent whack of of the colossal subsidies they’ve received for salvaging them. Certainly it seems unlikely that the UK government would be proposing these quite radical options had they not been prompted by Obama’s surprise move against Wall Street.
Even here Myners is contending that no action can take place on his chosen options unless there’s international agreement, which offers a convenient escape route. Of course an international framework would be best, but it isn’t true that no progress can be made without it. If the Government were really serious they could apply a financial transactions tax to UK domestic CHAPS transfers straightaway rather than waiting for wider G20 agreement.

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