Banking On Our Future
10 September 2010
The future of Edinburgh is inextricably linked to its financial institutions – but not only as the economic engines that drive our business lives.
The huge advantages of having banks headquartered in the Capital have spilled into all aspects of our lives – cultural, artistic, sporting and charitable.
That is why leading financier Ben Thomson, Chair of think-tank Reform Scotland, remains tireless in his determination to see some form of our banks continue to be headquartered in Edinburgh post-recession.
It is now apparent that the extreme turbulence experienced in the banking sector has seen effective control of HBoS and Royal Bank of Scotland head south.
Mr Thomson said: “These are two of the powerhouses that have helped mould our city. They have contributed not just through their financial success, but also through their contributions to, and support for, a whole range of the charitable, sporting, cultural and artistic activities that enrich our lives.
“They have even helped to define and maintain the architecture of our city centre. Think of the buildings that have been commissioned, are owned and occupied by our major financial companies.
“All of this has happened because these institutions are headquartered in Edinburgh, are part of the fabric of our communities. We are now at grave risk of losing that connection.
“That is why I am such a keen advocate of seeing if we can create two slimmed-down, Edinburgh-based “utility” banks from within HBoS and RBS – returning to the kind of situation we had years ago.
“Any city, or country for that matter, is very much improved by having banks headquartered and controlled from within its boundaries. These banks create the capital and liquidity that oils the engine of economy. Without them, we are less able to take our own economic decisions.”
The investment banker is also determined that Scotland should lead, rather than follow, in creating a new model for banking.
He said: “I am keen to see Scotland play a leading role in the debate that is going on internationally about the shape of our future banking system. Taking leadership in that debate would ensure Edinburgh remains a significant player in the financial world. Until recently, Scottish banking enjoyed a global reputation for prudent, strong management and we should be looking to help shape the banking of the future, pioneering what we think is right.”
Conversely, Mr Thomson argues, the loss of banks headquartered in, and run from, Edinburgh would have an enormous detrimental impact on the city.
“All of that decision-making to support the community in which the banks are rooted would be based elsewhere.
“In addition, in terms of the business life of the city, the banks are the source of the funds needed to help our entrepreneurs grow their businesses. They provide the funding for the deals that help our economy to grow, that our lawyers and accountants work on. The decisions they make have an enormous impact on the wealth or otherwise of our city. Scotland and Edinburgh will be weaker places if we lose these banks.”
Government has an important role to play in securing such a future, and not only as the majority shareholder in Royal Bank or in defining regulatory parameters. Mr Thomson said: “The UK and Scottish Governments also have important roles to play in shaping the future of our banks and our banking system, and in taking their decisions they must respect Edinburgh’s position as a financial centre.
“The city has a fantastic workforce, intelligent and qualified people, and that will be of great importance in taking the sector forward.”