Scrutiny Required for Present Bank Models: McFall

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Nov. 25 (Bloomberg) -- John McFall, Member of the U.K. House of Lords, discusses the Tomlinson report on RBS and the need for updated regulation for current bank business models. He speaks on Bloomberg Television's “The Pulse.” (Source: Bloomberg)

This issue of lending to small businesses has been a problem now for five or six years.

Every time the politicians confront the banks they say, look, we have money available to people that are coming to us.

Every time, individuals who i spoke to said, we are not coming forward with it because the channels are restrictive.

I think this report just indicates what the terms are.

They will need for the regulators to fundamentally change the business model of rbs.

It was a model of existing banks -- that mama was in the past.

There is a real scrutiny required for business models which the rbs situation illustrates.

The problem for the banks, they find themselves in a very difficult situation.

The bank of england is deeply concerned about companies that buy any normal standards should have gone out of business.

They really only exist because interest rates are so low.

Actually, in a normal economy, you would redistribute the credit elsewhere.

The kind of story we find ourselves with this morning vis- a-vis the report, how do we balance those two needs to see companies that are failing fail and we can move on, and to protect those companies that have a glimmer of hope?

It is a very fine line.

The banks are only in existence because, first of all, the taxpayer stepped in.

We have provided an unimaginable 75 billion pounds to keep the banks going.

If you have zombie institutions, then we should ensure that the customers that they are treating should be treated in a most respectful way.

What has happened is the banks have taken this money and they consider themselves sophisticated businesses, which they are definitely not.

There has to be a change of attitude towards the culture.

One of the issues that the parliamentary banking standards commission looked at was issues of culture and ethics in banking.

This all starts with behavior and how you deal with conflicts of interest.

It is a fundamental appraisal required by banks.

To date, they have changed insufficiently.

I think most people would agree with you that they have been changed -- have not changed sufficiently.

Nevertheless, we don't want some the banks propping up zombie companies.

We don't want it, but what we want to do is ensure -- we have got the biggest recession since the great depression -- we must come through this to ensure that companies which are viable but at the moment are not viable because of the recession, that they come through at the end of the day.

I think we have got to exercise a bit of attitude in that.

It doesn't seem to me that i don't think it seems to any politician, that the banks have been willing to extend a hand of friendship to small businesses.

Should the co-op be broken up in your mind?

I don't know yet.

I am waiting to see what the inquiry will deliver.

I think the sad thing about the co-op is that we had -- we need more diversity in banking.

Particularly with lloyds in the court, we have got even less competition and diversity in banking then we had five years ago.

That is another matter for the government.

In 2010, they said they wanted more banks, more diversity, more competition.

We have less of that now.

We have a troubled institution here.

You do have to wonder whether or not these branches would be better run by say virgin money, some of these new entrants into the banking world.

You look at the lay of the land at the moment and the co-op is going to struggle.

We have had a significant scandal and we need to move on quickly.


One of the things that the parliamentary banking standards commission was the issue of breaking up the banks as they exist at the moment.

That is an attractive proposition but in reality, that would take an awful long time to undertake -- 20, 25 years.

It is not on the agenda at the moment.

It would be sensible to talk about splitting up at the moment when the big issue is that we say that institution.


john, thank you very much indeed.

We're going to take a short break.


This text has been automatically generated. It may not be 100% accurate.


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