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Let The RBS Group Become A National Bank

by Jim ONeil on July 11, 2011

in uk banks

The British banking industry faces an uncertain future. Bankers are lobbying the independent banking commission led by Sir John Vickers. They fear that increased financial stability will affect their global business plans.

Last weekend, liberal Democrat and Labour MPs sent a letter to the Observer regarding the issue.

Those who signed this letter believe that future bank failures can only be prevented if investment and retail functions are separated. Doing this would not make high street banks any less reluctant to lend to a small business or first-time homebuyer.

This is just one indicator that disagreement regarding the future of the sector is bound to continue.

For the past few years, the government has encouraged banks to make additional funds available, with little result. In the opinion of some, the bailout provided to the banking industry was used to strengthen the bottom line of banks rather than being doled out to borrowers.

This, plus retail activity underwriting by taxpayers through deposit guarantees, makes bank reluctance regarding lending more of an issue.

A bank is needed that makes high street a priority- a national bank that provides cheap loans to small customers. UK taxpayers are 84 percent owners of the Royal Bank of Scotland (RBS) Group, which has branches in nearly every town within the region.

The government could achieve its goal of providing financing to small-scale borrowers by nationalizing the RBS Group and selling off its investment arm.

It seems unlikely that high street banks will undergo self-reform. British taxpayers have bailed them out and underwritten their retail activity, allowing them to fare relatively well since the financial crisis.

The government can lead by example, casting aside the hope once and for all that market forces contain the answer to our problems. Customers who need mortgages and start-up loans welcome the creation of a national bank.

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