Tuesday 27 January 2009

Burns Money: the honest new name in banking

What would the Chinese do to a chief executive who brought a major bank to its knees? Their traditionally uncompromising approach to such corporate misdemeanours was demonstrated by last week’s death sentences on two men involved in the recent tainted milk scandal.

While they march out a firing squad, we content ourselves with dishing out a certain amount of abuse in the media, bandying around phrases like “the world’s worst banker” with no apparent fear of libel writs. Meanwhile the alleged villains of the piece nurse the comfort blankets of their multi-million pound pension funds and doubtless plot their comebacks when the dust has settled.

It is the money that sticks in the craw, obviously. These fallen masters of the universe waxed rich on bonuses, based on profits that now turn out to have been entirely illusory. All of us as taxpayers are presented with the bill for the resulting black holes in the banks’ balance sheets. The bonuses, meanwhile, have doubtless long been wisely invested in houses, cars, yachts, holidays, horses, jewellery, opera tickets and similar essentials.

I have heard those with a taste for revenge calling for these undeserved windfalls to be somehow clawed back, suggesting that the holders of bank shares could take legal action to achieve this. But those shareholders are largely professional fund managers who in turn earned huge bonuses for the strong performances of their investments, based upon precisely those same fictional profits. So somehow I cannot see that idea taking off.

So what can be done to seek redress? Perhaps the Queen could take a lead by reclaiming her knighthoods and other honours from those who got us into this mess. Then she could surely confiscate the “Royal” from the all but nationalised Royal Bank of Scotland, which has had the most spectacular fall from grace. Any risk of confusion with another troubled institution north of the border could be avoided by the adoption of a suitable new name. In this 250th anniversary year, what could be more appropriate than Burns Money?

As one of Britain’s leading monarchists and a notorious snob, I was always rather tempted by a “Royal Bank” cheque book, but was luckily deterred by the presence in its title of that other word, “Scotland”. Always one to avoid, I feel, except when buying malt whisky.

So when my own bank became part of the expanding RBS Group a few years ago, I swiftly moved my account elsewhere. I recommended my new, very small bank to a rich friend who expressed horror at the risk I was running. “At least we can be sure the Royal Bank of Scotland will never go bust”, he said confidently.

Ah, such innocent days. When I was a boy, people similarly used to describe things as being “as safe as the Bank of England”. But then they used to say “as safe as houses”, too. Oh dear. I understand that geologists are conducting an urgent examination of the Rock of Gibraltar to ensure that there is at least one ancient simile that is still fit for purpose.

Surely the sad truth is that we all loved the idea that we could go on getting richer every year without any effort on our part. Just get a foot on the housing ladder and watch your wealth grow, even though the idea was as flawed as the machine for making bread from stones in The Rake’s Progress, or Jonathan Swift’s fantasy of extracting sunbeams from cucumbers.

We may smirk now at the folly of the mediaeval alchemists, struggling to turn base metal into gold, but I am not sure we have much to be smug about. Unless, of course, we happen to be a failed banker who received excellent advice in his fortune cookie and recently relocated from China.

Originally published in The Journal, Newcastle upon Tyne.

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