Peston's Picks

Banks: Don't panic!

• Robert Peston
• 19 Mar 08, 11:14 AM

The governor of the Bank of England is meeting the chief executives or our biggest banks tomorrow.

They will discuss the desire of the banks for the Bank of England to lend them more money for longer periods and against the security of a wider range of collateral (especially mortgages).

The intention would be to reassure creditors and investors that there is not the faintest chance of any British bank suffering a funding crisis of the sort that did for Northern Rock.

It's perfectly sensible for the discussion to take place. And it will be interesting to see whether the Bank of England now feels it can provide additional three-month, six-month and even 12-month money.

However the fact of the looming meeting appears to have prompted hysteria in the stock market.

Wild rumours have circulated about HBOS and Lloyds TSB both facing funding crises. HBOS's share price dropped an astonishing 20% at one stage.

The speculation is crazy. I have checked - and neither HBOS nor Lloyds are in that kind of trouble. They both have ample liquid resources.

So ignore the scaremongers - who may well be motivated by the desire to cash in by shorting the shares of vulnerable banks.

Though don't assume that the banking system is in the finest of fettle. The basic issue of how to restore confidence that all our leading banks have sufficient access to liquid funds is a real and urgent one.

So let's hope tomorrow's meeting between their chief executives and Mervyn King is a constructive one.

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Next versus Treasury

• Robert Peston
• 19 Mar 08, 08:23 AM

This statement in Next’s annual-results announcement caught my eye this morning:

“Trading conditions in the year ahead will continue to be difficult as increased costs and rising taxes put pressure on our customers.”

Or to put it another way, the chairman of Next, John Barton, seems to be heaping responsibility on the chancellor for the slowdown on the high street.

Now you may think there’s nothing terribly remarkable about that. After all, Next’s chief executive, Simon Wolfson, is matey with the new generation at the top of the Conservative party and there was a tax-raising Budget last week.

But the typical rule at publicly listed companies is that they don’t dump on the incumbent government for stewardship of the economy – usually because those companies think it’s sensible to be on reasonable terms with those who have the power. Cohabitation with ministers is unavoidable and shareholders get a bit antsy if that cohabitation becomes fractious.

There is an exception to that rule. If the prevailing wind becomes so strong against a ruling party, then businessmen often rediscover their critical voice.

So it will worry Gordon Brown and Alistair Darling that Next has piped up. And they’ll be fearful that other listed companies will join in the chorus of implicit criticism.

Also, Brown and Darling won’t welcome Guy Hands’s threat to relocate some of his Terra Firma private-equity operation abroad, which he made in today’s FT.

Hands believes that Darling’s changes to capital gains tax and the taxation of non-doms are damaging his industry.

But the political significance of Hands’s remarks is a little bit less than those of Next.

Privately owned businesses, like Terra Firma, have always found it easier to put the boot in to politicians.

They can say more-or-less what they like, because they’re not answerable to pension-fund shareholders and the millions of pensioners who depend on those funds.

By the way, Next’s shareholders might want to ask the retailers’ directors whether last year’s fall in sales at Next’s existing stores was all the fault of the government, or whether management shares some of the responsibility.

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