The 2012 edition of Banking Banana Skins (published by the Centre for the Study of Financial Innovation) is out and as ever makes fascinating reading. It reports a survey of bankers, regulators and observers of the industry – in particular, their views about the top current risks.

In one sense there is an impressive consensus. All three categories of respondents are extremely gloomy – the risk index is at the highest ever recorded by the survey (which has run since 1998). All three say the top dangers are macro-economic weakness, credit risk and liquidity (lack of), although in slightly varying orders.

There are some revealing differences, however. “The bankers’ response is especially notable for its concern with the negative impact of regulation, and growing political interference in the business,” says the report, written by David Lascelles. Well, with Fred Goodwin losing his knighthood, this is understandable at one level – there’s a nasty whiff of populism about this decision.

On the other hand, the populism is the consequence of dissatisfaction with the (lack of) action so far over the abuse of political and economic power by the financial sector. We are into the fourth year of recession, output remains well below its pre-crisis levels, unemployment is rising – and there is still a financial crisis. Nothing has changed in the banking industry. Large, complex, interconnected global financial institutions still cannot be allowed to fail, and are still being supported by cheap central bank funding, while at the same time they are not lending to business and not delivering good customer service (with no mis-selling). The bankers’ apprehension about political banana skins is understandable, but then so is the politicisation of banking.

Banking Banana Skins 2012