Leaders: Banking on change is a forlorn hope

Picture: Jon Savage

Picture: Jon Savage

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NO-ONE could possibly disagree with Alex Salmond’s call for a return to the traditional values and probity of Scottish banking.

The transformation of Scotland from a rural agricultural society in the early 17th Century into the workshop of the world in the Victorian era was powered by an indigenous banking system. One that combined innovation and entrepreneurship with canniness and a deep-seated Presbyterian dislike of lending without collateral.

Scotland’s banks took the meagre savings of a small nation and not only funded the creation of an industrial powerhouse, but went on to supply the infant United States with its early investment capital.

All this was achieved by thinking long term; by local bank managers maintaining a close relationship with customers (on the golf course and in the church pew); and by a rigorous – some might say conservative – view of the lending risks a bank should take. That distinctive Scottish approach to banking disappeared in the era of globalisation. Our banks abandoned simple lending for financial gambling using borrowed money – with disastrous consequences. No wonder Mr Salmond hankers after the kind of banks that made Scotland what it was.

Yet the Scottish Government’s latest pronouncement on banking comes with the distinct sound of stable doors shutting when the horses have long bolted. Mr Salmond, a professional economist who worked for RBS, was once happy to back the very financial excesses (presided over by Fred Goodwin) that he now criticises.

Certainly, the First Minister was not the only person seduced at the time – so was Gordon Brown. But past errors of judgment suggest that we need to approach the Scottish Government’s ideas on banking critically.

Finance remains a major player in Scotland, employing 43,500 people.

The Scottish Government’s new thinking argues for a transformed culture in the industry, with the stress on “banks putting the customer first”. And there is a ritual bow towards promoting credit unions.

But platitudes do not make a strategy. And anyway, as things stand, the government can do very little about UK regulated banks.

The major levers of reform are not currently in the SNP’s hands.

With the publication of this strategy, the Government might be open to accusations of the same political grandstanding of which business secretary Vince Cable was accused, after the latter demanded Holyrood legal officers expedite action against Goodwin.

The stated aims of the new strategy are of course laudable, but the measures outlined are not able to achieve them.

Final episode looms

MIGHT we be about to see the end of the Abu Qatada saga? No fewer than six home secretaries have tried to deport him from Britain, since he was convicted in absentia in Jordan in 1999, and sentenced to life imprisonment on terrorism charges.

Since then, Qatada has used every legal device, as is his right, to avoid deportation. His case hinges less on British law – he has never been charged with any offence here, despite much media innuendo – but on allegations his original conviction was based on evidence acquired under torture. And, indeed, that Qatada faced mistreatment himself in Jordan.

But yesterday Qatada’s lawyer told the Special Immigration Appeals Commission that the cleric may now be prepared to leave voluntarily.

However, there’s a “but”. Qatada wants Jordan to ratify (and honour) a treaty drawn up with the UK government that excludes the use of torture in trials.

Whatever we think of Qatada and his views (which are both extreme and repugnant) that should be counted as a victory for justice, not the cleric. And yet, by now we should have learned that nothing is ever simple with Qatada. On 17 March, he was arrested after a mass of suspicious communications equipment was found in his home. We must wait to see if the Qatada soap opera has really reached its final episode. Qatada is a dangerous man. We should not let boredom with his case erode our vigilance.

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