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Action needed to protect financial institutions
18/09/2008
The Scottish Parliament today heard First Minister Alex Salmond promise to 'strain every sinew and fight to the last' to protect bank jobs and decision making functions within the Scottish economy in the wake of the takeover of Halifax Bank of Scotland (HBOS) by Lloyds TSB.
At First Minister's Question Time in the Holyrood chamber, the FM said there were 7,000 Lloyds TSB employees in Scotland and 17,000 HBOS staff.
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He had spoken to both unions and banks and had called an emergency meeting of the Finance Services Industry Advisory Board for next Tuesday to discuss the situation.
Mr Salmond told MSPs:
"We have to ask did this necessarily have to happen? Was it inevitable that a 300 year old institution in Scotland, and all it means to the Scottish economy, should be laid low in the manner it is. I do not believe it had to happen. I believe it is a soundly based institution. Only yesterday the Financial Services Authority described it in these terms.
"It was laid low by the actions of speculators in the money markets and action must be taken against them. Other financial institutions will be targeted unless restraints are made to short selling. Short selling is when people enter into selling shares they have absolutely no title to whatsoever, and do it with the aim of making a speculative profit over other people's misery.
"I understand Russia has outlawed it, and that America has suspended it. I would urge our financial authorities to follow suit."
He reiterated this message of better protection of financial institutions in a key economic speech at the University of Strathclyde in Glasgow later on in the day.
The First Minister said:
"It is unacceptable that an institution that is given a clean bill of health by the financial regulators can, within hours, be brought to its knees.
"Consider this statement on the Financial Services Authority website only yesterday: 'We are satisfied that HBOS is a well-capitalised bank that continues to fund its business in a satisfactory way.' That could not be clearer. And that is why the Scottish Parliament united this afternoon to express outrage at the short-selling that has laid low the Bank of Scotland.
"And tonight I repeat my demand that UK authorities act to protect our financial institutions from these unacceptable attempts to manipulate the market.
"In the aftermath of the Great Depression, John Maynard Keynes wrote of these risks in his General Theory. It appears that Keynes, writing more than seventy years ago, understood the limitations and failures of the market better than most of today's regulators. He wrote: "the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done." Quite so. Although, belatedly, we see a growing international acceptance of this problem.
"Today Russian authorities moved to outlaw short-selling. In the USA restrictions have been placed on this activity and our regulators - and the UK government - need to do more than current proposals on disclosure of short positions and restrictions during right issues. If authorities do not act, the risk remains that the actions that have undermined HBOS will be repeated at the expense of others."