The Power of Customer-owned Banks
Chapter 12: Conclusion: a cooperative counter-narrative
There are several prescriptions for putting right a banking system that has proved itself unfit for purpose. After the banking crisis of 2008, the first thing the regulators did was to tighten their rules so that banks have to hold more capital to cover potential losses. There were calls to break up the big banks described as ‘too big to fail’ and to separate out investment banking from commercial and retail banking, but these have stalled against resistance from the banks. After bankers began to divert public bailout money into massive bonuses, there were calls to change the incentive structure so that they would only be rewarded for longer-term success. As Vince Cable put it, ‘Bank managers would be incentivised to be reliable, predictable and boring’ (2010, p. 193). This is being done and the bankers’ behaviour is changing as a result, though not as much as the public would like. Another round of bank failures and bailouts within the European Union led to a plan to allow banks to fail in the future; the costs would fall on equity and bondholders rather than on taxpayers, and an explicit resolution regime would make the process orderly and predictable. A new tax on banking transactions is proposed that will recoup some of the losses to the taxpayer and build up a fund against future losses. Alternatively, an insurance scheme would do the same job by creating a rescue fund (Llewellyn, 2010).
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