The government has announced that banks RBS and Lloyds, who were saved by taxpayer’s money, will have to sell off assets.
People have been asking me what this means for their own money and for the future of British banking.
Let’s start with what it means in the short term; RBS will probably have to sell insurance branches like Churchill, Direct Line and Green Flag, along with its investment banking business and some bank branches.
Lloyds is likely to sell Cheltenham & Gloucester and the Lloyds TSB network in Scotland, which in fairness isn’t a terrible deal for them as they lose elements of the cash strapped add-ons they inherited after the HBoS purchase.
If you have money in any of these companies bear in mind a sell-off will take at least four years so it’s business as usual for the time being.
Bank branches will stay open while a buyer is found, and telephone and internet banking systems will remain.
If you have an insurance policy just continue to pay the premiums. 2013 is a long way away and, as always, shop around when it’s time to renew your policy.
If you have a loan or mortgage through any subsidiaries being sold then it will be sold to the buyer.
The new owner can’t change a fixed rate loan or mortgage so it will continue under the same terms.
Standard variable rate mortgages may be subject to change unless your rate is in the contract.
It doesn’t look like customers are to be compensated in any way and despite warnings that taxpayers could lose billions of pounds in a fire sale of these banks, a sale is unlikely to go through for a few years when prices will be more realistic.
With RBS and Lloyds being broken up it reflects a wholesale change in the banking section for not just Britain, but the world.
The banks are selling subsidiaries as punishment for their role in the crisis but also to encourage more competition and to send a message calling for responsible lending.
Boosting competition and having a more manageable banking sector which offers more choice to consumers will increase accountability.
I would like to see new entrants to the high street, Virgin Money and Tesco look likely candidates and new entrants starting from scratch in Britain will have to offer highly competitive rates to grab attention and get customers.
Through our bigger banks’ irresponsibility and unaccountability, Britain over the last decade allowed itself to become the most indebted country on earth. Ever.
The recession hit us harder than most because we had no contingency plans for when the lending bubble popped.
The key figure here is £740bn, this figure is the debt facing British banks.
If the banks were told to pay it back without taxpayer money, the country would have folded like Iceland did.
Selling on bank assets will wipe the slate clean, selling off the legacy of boom and bust and inviting in new investment we can regulate and manage.
The banks were too important to us so tens of billions of pounds of taxpayer money was used to plug this debt.
Hopefully we’ll soon find the economy more democratic and I for one want my voice listened to.
The near-collapse of big banks demonstrated that unelected people make decisions daily which affect all of us.
We need to ask questions – the government didn’t do a great job of that on our behalf – and with a more ethical structure, society has a major stake in the banks so it’s our right.
No one wants to be in this mess again and we need to be able to take bankers’ and financiers to task the way we do Westminster.
Governments from America to Asia to Europe used taxpayer money to bail out banks to the tune of 9 trillion pounds. The world’s people want the system to change to avoid more catastrophe.
We collectively fought against bankers’ bonuses because without our money – the system would have collapsed – and greedy bankers still wanted to reward their failure.
We can’t and shouldn’t allow this situation to happen again. We need bankers to be accountable for their actions as it affects our day-to-day lives the way government decisions do.
My choice would be tighter regulation and more interaction between us, big shareholders, and the banks is essential and a fairer system for all.
Don’t get me wrong, there are tight times ahead and unfortunately, more jobs and more small businesses will disappear.
But a new type of capitalism and allowing smaller banks in where we can regulate them, ask questions and demand answers as shareholders will provide a better, more ethical spread of wealth and promote compeititon, driving prices down.
Our nations finances should be in the hands of many, not the few.
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