This morning the endless leaks and speculative stories about the banks and their capital continue up to the deadline for the announcements. It is far from helpful, and not a good way to conduct such sensitive negotiations and reconstructions.
The good news is that one of our main banks, rumoured to need public money to strengthen its balance sheet, is now rumoured to be be able to raise what money it needs in the normal way from shareholders and the markets.
Let us hope more of our banks want to stay independent and take the obvious actions they need to take to do so.
You would have thought all the banks needing more capital would start by asking their existing shareholders for more, and seeking money from the markets. Not paying dividends for a year or two might in some cases be sufficient without having to ask for more capital, as the dividends have been large. Certainly, a bank short of capital should adjust its dividend policy to its new straightened circumstances before seeking taxpayer gold.
It would be helpful to hear from the Regulator. How much extra capital does the Regulator think banks need in current circumstances? Whilst I am all in favour of the Regulator acting behind the scenes without leaks and rumours in the cases of individual banks, I would favour a public statement about the overall ratios the banks have been achieving, and about any move by the Regulator at this stage to demand larger capital cushions against future losses.
Those who want widespread bank nationalisation cannot have not looked at the numbers involved. Just four of our banks have combined liabilities in excess of £ 5 trillion, compared with UK public spending of around £0.6 trillion, and UK total income and output of around £1.5 trillion. The nationalisation of Northern Rock was a very bad deal for the taxpayer, preventing that bank from making new mortgages for competition law reasons and forcing the taxpayer to pay for the run down of the institution.