What could the government do to restore public confidence in banks?

Last week the Confederation of British Industry warned that mistrust between banks is now worse than it was last autumn. The warning comes amid continuing turmoil in the banking sector and government preparations to unveil changes to the supervision of banks’ liquidity.

So, this week Mortgage Strategy asks… What could the government do to restore public confidence in banks?

James Ramsden, 48, IT developer
The government must take steps to restore confidence in the banking sector. Bearing in mind the fact that Northern Rock has been nationalised, it should not allow ex-chief executive Adam Applegarth to take his big pay-off. It seems he has profited despite nearly bringing the bank down. Of course banks exist to make money but the government should guarantee higher levels of savers’ deposits.

Patrick Dunne, 27, waiter
Plenty of banks’ shares are falling in value but I don’t see what the government can do about it. I’ve been with HSBC since I was 17 and haven’t lost faith in it yet. Some banks have lent to consumers who can’t afford to pay their loans back and that’s immoral. I don’t think the government is brave enough to stand up to banks but it could curtail their advertisements aimed at consumers in financial difficulties.

Tim Telling, 30, freelance writer
I don’t feel too anxious about banks because I only regard them as a utility. The economy has been through a healthy period and banks have become arrogant when it comes to making money. It seems that some will lend to anyone with opposable thumbs. I’m not sure what the government can do – after all, it doesn’t provide sub-prime mortgages. And anyway, if it does anything, will it be protecting the interests of banks or single mothers saddled with mortgages they can’t afford?

Michael Purvis, 40, engineer
I trust my bank as much as any other organisation. Not all the problems that have occurred in the banking sector are banks’ fault. To some extent the government caused some of the difficulties – particularly those with NR – by having a system whereby the Bank of England, the Financial Services Authority and the Treasury act alongside each other. There does not seem to be a single person or institution in charge. The government could help prevent situations like NR in future by giving regulatory powers to someone who could take charge of all three organisations.

Andy Parker, 48, project manager
The government must change its plans for when something goes wrong in the banking industry – the NR crisis demonstrated this above anything else. The government should have a system in place whereby if anything goes seriously wrong, it can take quick and decisive action. I don’t think it will make much difference if the government raises the level of consumers’ savings it guarantees.

Maria Phillips, 32, legal secretary
Perhaps the government could work with the BoE to figure out a way to pump more liquidity into the market. This might go some way towards increasing trust in banks. But having said that, no matter what the government does, it will be difficult to change the way consumers think.

Gaye McDonald, 18, model
It doesn’t matter what the government does, it won’t change how I think about banks and the way they operate. The only positive thing the government could do would be to look at banks’ advertisements and ensure consumers aren’t suckered into taking out loans they can’t afford. If we live in an age where smoking in pubs can be banned, surely the government can look at the nature of advertising loans to people in financial difficulty.

Alistair Hills, 24, event manager
There’s not much the government can do to restore the public’s trust in banks, or in the economy for that matter. It’s going to take some time for the financial markets to get back to normal. Perhaps the government or the regulator could take a look at situations in which consumers borrow too much money, but then again I guess that’s always going to happen.

Shola Jahromi, 24, advertising consultant
The government should do more to help students and it should also regulate banks more tightly when it comes to credit cards – especially the way they issue them to students so freely. Another thing it could do is take a look at student loans and how expensive they become after university. I know several people who have been put off going to university because of the expense. The government needs to work out how to improve the standard of students’ finances.