CBI Conference: Vince Cable speech

CBI Conference: Vince Cable speech; Vince Cable speech continued SOT And a further problem that previous governments seldom needed to think about – maintaining a flow of credit to good, credit-worthy companies – is central to my agenda and my colleagues. We are after all still cleaning up after the massive damage caused by the near collapse of the banking system. I can imagine Richard becoming alarmed and covering his eyes and worrying that I may be about to embark on another round of “banker bashing”. What I can tell him is that an awful lot of companies tell me – including a lot of CBI members – that I am perhaps not bashing them enough. There is no point here or anywhere else, embarking on a sterile public exchange of insults. But nobody listening to the Chancellor’s statement last week can be under any doubt of the Government’s collective determination to ensure that banks act in the interests of the British economy as a whole – and that in the New Year they must not engage in another self-indulgent bonus round. I do, however, agree with Richard, when he says that politicians should not just criticise but describe what kind of banking system they want. How should it look in five years’ time? A guiding principle should be investing for the long-term. The model of finance that brought us to this crisis was disastrously short term. Securitization was a valuable financial innovation, but it reached the point where investments were being made with little concern for long term because everyone assumed they could sell their instruments in liquid markets. Loans were increasingly divorced from the relationships that make the loans work. What the Bank of England governor calls the casino part of investment banking came to dominate and in some case destabilised leading banking institutions. There has to be an important role for trading activities; for hedging in markets like foreign currency and commodities: these are inherently v...