With hindsight, it’s a shame the UK banks kept quiet – and arguably they only have themselves to blame. Douglas Blakey comments
In the run-up to the Brexit referendum, UK retail banks fell alarmingly silent on the likely cost to their business, their staff and customers of a Leave vote.
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Yes, UK electoral law places strict limit on political comment during official campaigns and yes, there was an element of banks not wanting to upset Leave supporting customers.
The UK banks deliberately worded their comments so carefully, they basically said nothing of note.
Even among some of the major vendor community, there was a policy of ‘no comment if pressed for a view on Brexit’.
The UK bankers trade body, The British Bankers Association, apparently contacted all members ahead of the referendum, flagging up how banks should comment at roundtables, conferences, dinners and debates ahead of the referendum.
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By GlobalDataAs for some of the so-called highly paid experts at leading banks: it beggars belief how they got it so wrong, so close to the referendum.
Take the team at JP Morgan at random, for example. Pity their clients who received and acted on the advice a week ahead of the referendum: “We view the elevated uncertainty due to UK’s EU referendum on 23 June as an opportunity to add to our top UK bank long-term pick Lloyds”
Fast forward a few days and Lloyds shares have fallen by 22% since that share pick was given.
Immediate fall-out of the disastrous referendum outcome is hard to quantify and will only become clear in the coming weeks but here are some safe(ish) forecasts:
- The UK government sell off of its stakes in Lloyds and RBS: forget it. This is now a long-term project as opposed to short-to medium term;
- Provisions for bad loans will rise in the short term as economic conditions deteriorate on fears of recession;
- Mortgage lenders will suffer as buyers may well look to delay purchases due to economic uncertainty;
- Scotland: renewed uncertainty over the future of the UK. Will the likes of RBS and Standard Life again consider the location of their HQ?
- Consumer protection: existing EU rules protect 100,000 of customer savings in a single institution; the UK government has done some daft things in recent months but one would hope that Brexit does not result in any weakening of the FSCS scheme. Do not be surprised if the existence of the scheme and its alleged unfairness for the strongest banks comes back into focus.
The compensation limits were last amended in 2010 to bring them into line with European Union directive 94/19/E.
