The Royal Bank of Scotland which owns Natwest, could end up with 60% of its shares belonging to the Treasury. This would be an indictment of what many to consider to be the crass arrogance that has caused the fall of many financial houses in the current climate. Banks are meant to be institutions we can all trust to do the right thing and ensure our hard-earned cash is safe!
All the banks are hoping they can stave off the need for any Government funding by raising the cash privately from existing shareholders. However, on the balance of recent performance they are going to struggle even with the aforementioned surety. Confidence has all but gone, although some of it has returned on the trading floor as share values rose slightly in light of the news.
It will be interesting now to watch the world economies and how they respond to the cash injections that are seemingly becoming a daily occurrence. These are uncertain times, but one thing is sure, investors are going to need somewhere to keep their money and under the mattress is not always the best option!
It’s difficult to know who or what you can put your trust in right now, but the thing to realise is the banks will survive. One way or another major High Street names will continue. It’s certain the way they operate will be subject to close scrutiny and will change beyond recognition.
There could actually be some very tangible benefits from all that is now unfolding. If the Government own a sizeable share of the banks and they go on to become hugely profitable again, much of that wealth should find its way back into the public purse rather than in the pockets of the “Fat Cats.”
Another positive is that banks may be regulated a lot more closely on lending policy, which is likely to ensure they do adopt a policy of responsible lending, rather than pure profiteering at the expense of the most vulnerable and needy. The only reason they have got involved in adverse lending is to grow profits, no matter what they might have us believe.
The shake-up needs to start at the top as that is where decisions are made and the buck must stop! There is already talk of cutting big city bonuses and tighter constraints on the way that they might be calculated.
There can be many positives taken from these latest announcements if they are applied in a sensible and responsible manner and not just a bail-out allowing everyone to continue with the same madness. I the banks and other lenders see this as a “let-off” and try to carry on as before, we will end up once more overlooking the same precipice, but with a lot less chance of a safe landing!
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