Sky News business editor Michael Wilson

Thank goodness it's Thursday. That's the mood today. A long weekend to rest the wiser heads that have been trying to sell confidence all week and are now rather tired.

Because that's what disappeared and is going to take a long time to recover. The Easter break will be just that  - a few days off  from a febrile week, and the same mood will be waiting on Tuesday.

The heads of the UK's major banks are meeting the Bank of England governor, in what was supposed to be a routine meeting to discuss the reform of banking legislation.

But after yesterday's trashing and cashing of HBOS shares, the Bank of England being forced to deny rumours of a new UK financial crisis and the stern warnings from the authorities about the seriousness of profiting from malicious rumours, the meeting has gained an altogether different dimension. 

The bank chiefs will want the Bank to lend more money against a wider range of collateral -  what the Bank's loans are secured against – but since Mervyn King, the governor, has set his face against giving an easy way out of bad decisions, they're unlikely to get what they want. If any bank gets into trouble, there will be no bailing out.

The discussions will be fairly technical and won't address the real bank robbery that took place yesterday. The pictures of customers queuing round their failing Northern Rock was one of the most dramatic images of last year. They didn't trust the guardians of their  money any more.

Now the trust of the system has been stolen. Banks will be punished by the markets if they are too 'honest', because the benchmark of trust has been tarnished. It doesn't  matter what the truth about the 'trashing and cashing' of HBOS was yesterday. Now everyone is looking over their shoulder, and it's difficult not to be afraid of the next problem.

After a gloomy Budget that said little and a downturn on the horizon – this shakiness at the roots of the financial system will merely add to the gloomy, fatalistic mood that much of the country will find itself in.

Comments

[Ian, Surrey 24 Mar 2008 10:14:19]

Much has been written in the FT and weekend press - suggesting the BOE is willing to subsidise banks by taking on the banks' poor credit risks.

This creates a situation where:
Heads (i.e. profits) - shareholders win
Tails (i.e. losses) - the taxpayer bails out the bank

Surely the right answer is that the banks should raise more capital through rights issues to their shareholders?

Why does the press not see/promote this?????

[chris hall 21 Mar 2008 09:20:21]

what is going on ? a few weeks back high street banks were announcing massive profits.... and still charging over the odds on overdraft fees ... are they worried that they may have to use these profits but want to borrow someone elses money ??

[Elizabeth Davies Cape Town 21 Mar 2008 05:21:49]

All I have to say is ...give someone the opportunity and they will do the crime.
It's a good job the market does not open on Monday or it would have been a "black one" I think. But it will be a "tricky" Tuesday instead!

[Khalid 20 Mar 2008 17:54:23]

Sir
For over a decade, banks as well as government have been robbing society un-challenged,whilst penalising those entrusted to ensure such mal-practice does not occur.
Todays meeting with the chief of the bank, late as it is, does indeed pave the way for independant dealing, save for matters within, provides for better consumer protection, if only it was allowed by virtue of legislated statutes as well as governing bodies with a bit of back bone.
Naturally, any overhaul will be painful, but the long term gain spread over three years shall provide more for the consumer as oppose to fund a financiers holiday to the [Rivers Of Babylon] with every one except [Boney M].
So, if Mervyn is to ensure financial stability, he must be given complete independance, the FSA/FOS disbanded whilst courts given the powers to ensure tavesty surrounding justice does not ocurr ever again, unless ofcourse the independance of the judges becomes a matter similar to the honour within the house.
To that end, whilst Easter emerges and I deliver an egg or two, keep warm, keep safe and keep a check on those bank charges!as banks profit from your defaults, whether created by them or you!
Have A Good Holiday!