'Edinburgh should lead financial reform'

Monday, March 08, 2010

Edinburgh should host a global conference on bank reform to strengthen its position in the financial sector, according to Reform Scotland chairman Ben Thomson.

Speaking at 'Edinburgh: the next five years' conference examining the Scottish capital's aspirations, Thomson said the city should embrace regulatory and structural changes and "help lead them".

Thomson said the first step to restore Scotland's financial reputation would be to "take back" its own banks and retain their headquarters in the city.

Already the Royal Bank of Scotland (RBS) has been bailed out by taxpayers' cash to the point that 84 per cent of the institution is now owned by the UK government. Elsewhere, Lloyds Banking Group controversially acquired HBOS and is now 41 per cent owned by the taxpayer.

Thomson said while the development of new banks by firms such as Tesco were showing a "creative" edge he added that "it is much harder to build a bank from scratch than work with an existing one".

"There must be an opportunity to an informed degree to create a bank from RBS or Lloyds Group where the government have the dominate shareholding pot," he said. "This would be best done by demerging RBS from Natwest and Bank of Scotland from Halifax and Lloyds. This would not only create competition in the sector, currently dominated by four big players, but also there's a strong argument that by demerging these banks they will become more transparent, with clearer objectives and as a result will become more valuable to the shareholders."