Political prying biggest risk facing banks, say bankers

Senior bankers are complaining that political interference is the biggest risk facing their industry despite the billions of pounds of taxpayer money being used to prop up the banking system. Stephen Hester, chief executive of Royal Bank of Scotland, has already lambasted the "politicisation" of the bank which was bailed out by the taxpayer in October 2008. A poll by accountants PricewaterhouseCoopers, and thinktank the CSFI, has found that Hester is not alone in being concerned about the impact of politics on banks. The poll, conducted for the past 15 years, has never before raised "political interference" as a risk. John Hitchins, UK banking leader at PwC said: "With political interference as the top risk and too much regulation at number three, the concern is that the financial crisis has taken the banking industry's future out of its own hands". "The dash by governments to rescue their banks from disaster may have staved off a collapse of the system, but it has left attitudes to the banking industry deeply politicised. A proportionate response is now needed to avoid damaging the banks' long term capacity to return public funds and enable them to play their essential role in the wider economy effectively," he added. The complaints about political inference were also raised at last week's annual World Economic Forum in Davos. But Alistair Darling made it clear to the bankers that he had little sympathy for their irritation . He told them: "Don't feel sorry for yourselves. Work with governments to see how you can improve the situation". Banks have been angered by the Chancellor's 50% one-off bonus tax and also by plans from the US to levy a financial crisis responsibility fee on banks intended to raise $90bn (£56bn) over 10 years and a pledge by Barack Obama to limit risky activity of banks through the biggest regulatory changes since the Great Depression. David Lascelles, editor of the survey, known as Banana Skins, said: "It is ironic that politics should emerge as a risk when the banks had to be rescued in the first place. But there is clearly a crisis in the relationship between banks and society, and it will take years to rebuild trust. Until it is, banks will operate under a financial handicap." Among the bankers to voice their anxiety about regulatory change is Barclays president Bob Diamond who told an audience in Davos that slim lining banks would be harmful. He said: "The impact on jobs, global trade and the global economy would be very negative."