Myners hits out at Basel over banks' margins

BANKS should not be allowed to continue earning very high margins after "gouging" customers for years, the financial services minister said yesterday.

"The banking industry has enjoyed more public subsidy than any other industry in our economy," Paul Myners told a hearing held by the Future of Banking Commission set up by consumer group Which?. "It should not be able to sustain a return on equity of over 20 per cent," said the former fund manager.

An investor in bank shares over the past decade would have lost money but a trader working for a bank would have made millions, Myners added.

A Bank of England paper has said return on equity trebled from 7 per cent between 1920 to 1970 to an average of 20 per cent until the financial crisis hit in 2007.

The Basel committee of central bankers and supervisors from the G20 group of leading countries is thrashing out tougher bank capital rules to apply lessons from a crisis that forced the UK government to spend billions shoring up banks.

Myners said Basel must take care in the finalising and phasing in of its new rules to avoid harming the economic recovery.