Small business bank account holders paying the price for UK corporate bank failures

Recent analysis has revealed that both UK retail and small business account holders have been left with the bill for poor business decisions made by high street banks’ investment banking arms due to huge losses in that sector.

Bruce Packard, an analyst from Lodon-based  Seymour Pierce recently reported that the investment banking industry has suffered losses of 75 billion cumulatively (which exceeds the losses incurred by retail banks by 500 per cent), yet despite this dismal performance, British banks are not cutting back on the resources they supply to their markets divisions.

Mr Packard added that the indirect cross-subsidisation by taxpayers through bailed-out retail banks of their traders and investment bankers should not be encouraged.

One such partly nationalised bank, RBS, has been contributing to the problem.  The losses its investment banking arm incurred rose to £61 billion, yet their retail banking operations only lost £3.4 billion in comparison.  Lloyds TSB, another recipient of government bailout money, lost only £9.3 billion retail whilst racking up in excess of £4o billion in their wholesale markets.

Mr Packard expressed concern over the new practice that some UK banks have instituted in which they expanding their margins to both their retail and small business bank account holders in an effort to recuperate losses incurred by their investment banking divisions.  Stating that because larger corporations tend to have expert staff who can manage banking relationships with a high degree of dexterity, banks focus on their retail and small business customers who lack the acumen to protect themselves.

While RBS declined the opportunity to comment on the statements issued by Seymour Pierce, a spokesman for Lloyds commented by downplaying their role in the investment banking market by stating that the bank has no intentions in growing past their “basic” commercial and retail banking offerings.

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