Terry’s got it right as Lloyds sale branches into fiction

From the London Evening Standard: Terry’s got it right as Lloyds sale branches into fiction To those in the City who are of literary bent, the best book on the financial crisis is Terry Pratchett’s Making Money (he wrote it before the banking system collapsed, but then, he’s a clever fellow).

Pratchett, a comic fantasist who still couldn’t really have come up with a character so vaingloriously absurd as Sir Fred Goodwin, imagines a bank takeover that involves vampires and characters with names such as Moist von Lipwig. (There are hardly any vampires in real-life banking.)

If Making Money were required reading at the Financial Services Authority, perhaps we would all be in much better shape.

When the tyrant Lord Vetinari appoints the head of the post office to run the Royal Bank of Ankh Morpork, objections fly.

Doesn’t he realise that banks should be run by people who understand banks? Vetinari responds: “People who understand banks got it into the position it is in now. And I did not become ruler of Ankh-Morpork by understanding the city. Like banking, the city is depressingly easy to understand. I have remained ruler by getting the city to understand me.”

This storyline finds a parallel in the FSA’s handling of the sale of 632 branches of Lloyds to the Co-op, a deal that now seems unlikely to happen. The difference being that unlike Vetinari, the FSA insists that only people who have previously mucked up banks can run them in future (I exaggerate, a little).

Last week, Lloyds said exclusive talks with the Co-op had ended, and others are now invited to join the fray.

This followed weeks of suggestions from the regulator that the Co-op would not be a proper owner of the business.

It has a financial services arm with revenues of £2 billion, has never gone bust or needed a public bailout, and worst of all it doesn’t have a chief risk officer! Unlike, say, Royal Bank of Scotland, Bradford & Bingley, the Halifax and Lloyds. Which all just sailed through the financial crisis.

The Co-op board, sniffy-sounding leaks noted, included a Methodist minister, a plasterer and a nurse.

Such folk cannot be relied upon to pay themselves £2 million and blame other people when things go wrong. It would be banking anarchy.

So now Lloyds is reportedly in talks with an organisation called NBNK, a bank that doesn’t really exist yet, beyond having a board stuffed with the great and the good of the banking industry (Lord Levene, Sir David Walker, definitely no plasterers).

NBNK will need capital from Middle Eastern investors to proceed, it seems, but maybe it would do a decent job of improving competition for borrowers and savers.

Still, it is rather a pity that competition couldn’t come from a larger mutual, such as the blameless, rather likeable Co-op.

Unlike the FSA, Vetinari would have had no problem with this.

Perhaps Pratchett can persuade Vetinari to become the next Governor of the Bank of England, if only in fantasy land, so we can see what a happy ending looks like.