Debit and credit accounts needed
The Department of Finance has proclaimed a "new relationship" between the Government and the banks. Such a departure is long overdue, and much of our future prospects will depend on its success.
At present, relations are at best uneasy, and all the more so because our banks have never confessed adequately to their major part in bringing about the economic crisis -- or behaved as if they were subject to the taxpayers -- whose money has kept them afloat.
They can point, truthfully, to a former promise that in bilateral dealings the Government would stay at "arm's length". That was never realistic. The interaction between the two is fundamental to the proper functioning of the economy. At present it does not work. This must change.
Under the new relationship, there will be more, not less, supervision. Decisions, not always of the highest importance, will be referred with greater frequency to the department. Presumably note will be taken of whether these decisions promote the declared aims of the Government, which include better deals for mortgage holders and small businesses.
Of course greater freedom for the banks is desirable. But that is not possible for bailed-out banks in a bailed-out country. Behind the Government stands the EU-ECB-IMF troika, which scrutinises our financial affairs with the keenest of eyes.
Much more disturbing for large sections of the public is the proposal to remove the ban on bonuses. People find it offensive that bankers can receive substantial payments, on top of huge salaries, at the expense of those who have lost so much in the crash.
But the banks argue -- for once, with some justification -- that they must have a little latitude to attract suitable staff. They claim that in their international sectors they have lost senior staff to rivals. There seems little choice but to allow the resumption of bonuses.
It must, however, be made clear that bonuses will be paid only in unusual, clearly defined circumstances, and only on the basis of established performance. And it must be made equally clear that no government can permit them without incurring unpopularity.
One of the outstanding characteristics of top bank managements is their almost complete divorce from the lives and feelings of ordinary people. They evidently feel that their own rights exceed those of everybody else.
That may have been acceptable when banks did their job and everyone profited. It is not acceptable in our current circumstances.
We need more than a new relationship between the Government and the banks. We need a tripartite relationship which includes the banks' customers. This is essential for medium-term recovery and long-term prosperity, and all of us are entitled to know where we stand.