In defence of the banks (sort of)

It's difficult to find any sympathy for the UK's High Street banks as they come under attack from the media again. Still, it's the first day of Lent, so let's give it a try.

The press (led this time by the Independent) seems to find all of the ways that banks make money distasteful at best, larcenous at worst. In no particular order:

* it's wrong for banks to maximise the spread between borrowing and deposit rates;

* it's wrong for them to charge for the operation of current accounts;

* it's especially wrong for them to charge personal customers who exceed agreed overdraft limits;

* it's wrong for them to charge people for the use of cash machines, or to sell off their unprofitable cash machines to companies that will levy charges for their use.

And so on. I'm not defending any of these particular charges (though most of them seem quite easy for consumers to avoid, with no more than a minimal effort). However, it seems that the current media frenzy reflects nothing more than distaste for the fact that the big banks are posting large profit numbers. I remember a similar bout of bank bashing in Canada, which the then-President of my own bank attempted to defuse by suggesting that bank profits were "large but not high". You can see what he meant: banks are among the biggest institutions in the economy, so if the economy has been growing steadily for many years, it only makes sense that their profits get bigger. That doesn't make them excessive.

The media almost seem to imagine that the UK would be better off with a loss-making or at least a less successful banking system. Experience with financial crises caused by undercapitalised financial institutions around the world strongly suggests that this is not the case. (The banking system in China remains an accident waiting to happen; when it all goes off there, watch out). The current campaign of vilification also seems to ignore the fact that the banks' shares are a major component of most UK mutual and pension funds, so their profits are helping in some way to pay for people's retirement. (We had a term for this in Canada: pension fund socialism).

During the Canadian bank-bashing blitz that I mentioned just now, the heads of the major banks were summoned to a meeting by the publisher of the Toronto Star, the most left-wing but also the most profitable of the city's papers. He issued a demand that they offer free bank accounts to the poor. The banks refused, but I always wondered if any of the CEOs had thought to suggest that he'd go along with the request as soon as the Star started giving away the paper for nothing. I wouldn't suggest that here, though. I think the poor have quite enough problems without being saddled with a free copy of the Daily Mail each day.