THUS Magazine

By John J Kelly

I made a rare visit to my bank last week, and was reminded why. I needed to send £62.00 to Switzerland. After a lot of wasteful form filling, I was charged £20.00 for this ‘service’, which will take 4 working days to process. The exchange rate is likely to operate on a 1.5 – 2.5% spread. The total transaction will be close to £100.00. Adding injury to insult, the bank called me and asked for ‘further proof of identity,’ despite giving them my card  and pin number, both of which they had issued. Some of this idiocy relates to the belated money-laundering regulations imposed at the behest of America and the EU (to which Britain, but not its financial system, sometimes belongs) after some British banks had scooped up most of the Russian mafia’s savings accounts. Part of it is endemic ignorance, inefficiency and extreme parochialism, but mostly it’s just routine gouging.

From Williams and Glyn's to RBS to HMG to Carey Street

I have been a customer of this bank since 1973 when it traded under the reassuringly Victorian name of William’s and Glyn’s, originally a Manchester bank I believe. I was attracted by the promise of an ‘alternative’ to big banking (no surprise there) but saw it morph from the smallest to the largest, most leveraged, most greedy and now most government-owned. I didn’t move because I thought the rest were probably just as bad, knew that some were worse, but not because it ever tried to reward my loyalty. The abiding reason why Royal Bank of Scotland’s shareholders failed to snap up its second rights offer this year, forcing the government to underwrite £14 billion of our money, is related. Apart from paying far too much for both NatWest and ABN Amro with little evidence of real synergies, the RBS policy of gouging and bullying its customers once it became a giant, proved unsurprisngly counter-productive. Natwest owns Coutts, bankers to the Queen, who enjoys a more personal service than most, with an ATM machine in the basement of Buckingham Palace. Presumably the recession will mean that she will also receive a personal professional beggar in blankets to moon about outside said cash machine, asking for spare change. I digress, but I have always found this puzzling. The smallest denomination of currency these machines dispense, if you can find one that works, are £10.00 notes, not change. Given the shaky state of RBS finances, HM might be well advised to switch to GiroBank or the Post Office Savings Bank. They will probably give her a free plastic piggy bank or install a box in the basement with a bloke in it pretending to be a cash machine, handing out readies.  

RBS was good when its core business was personal banking. As things stand, the government has bought another turkey, which moreover operates back office banking for Tesco, Sainsbury and several of the other quasi-banks that have sprung out of our ‘vibrant retail sector,’ not to mention retail insurance (Direct Line) and mortgages. This will not be its last cash call. Break this monster up, give the Dutch their own busted bank back and repay the taxpayer as quickly as possible.  And encourage our banks try and at least pretend to be interested in Europe.

PS. Consider buying RBS shares if and when they get below 40 pence, if you’re into that sort of thing. Their asset value is greater than that and in the hands of decent managers the bank, if broken up, could thrive anew. The Tories are bound to sell them back to the markets, if only to ease the debt burden, which means 2010 at the latest. Bradford and Bingley and Northern Rock were should have never demutualised and both were mismanaged by oddfellows. HBOS is a puzzled entity, a mixed marriage between Bank of Scotland, a commercial bank which had few retail branches in England, and Halifax, once the UK’s largest building society.  Halifax were very inexperienced and bad at banking, while BOS were not adept at small scale mortgage lending. Result: misery. Their shares are probably a bargain at around 55 pence on the promise of a divorce. You’ll need to wait a couple of years to see a return, though. The FT SE100 index is likely to fall below 2600 in my opinion, as people are forced to liquidate whatever equity they have. On second thoughts, don’t pay any attention whatsoever to me, or to financial journalists, who are mostly feckless layabouts or blowhards. Play ‘share picking’ monopoly in your head and mentally kick yourself when it all comes true, banks are valuable again, the sun still rises in the morning and the sky didn’t fall in.