KAMIKAZE FATCATS
Darling targets bankers
BANKERS who wrecked the British economy will have their hands tied by tough new rules.
Chancellor Alistair Darling will this week announce powers to crack down on Britain's banks - with new reforms to prevent another credit crunch.
Writing exclusively in the News of the World today, he declares: "We need to learn lessons from the financial crisis in which banks behaved in a kamikaze manner and the regulatory system failed . . . I want a new banking system we can all rely on."
Mr Darling is to give himself new powers so he can demand the Bank of England and the Financial Services Authority take fast action against rogue banks.
In 1997, Labour made the Bank of England completely independent.
But when the credit crisis erupted in 2007, Treasury officials were frustrated at the slow steps taken by the Bank of England to intervene.
Mr Darling will have a veto allowing him to over-rule the Bank's governor, Mervyn King. A Treasury source said: "We need to ensure we can intervene quickly when we need to, and that means a veto."
But Mr Darling will try to offset this by giving new powers to both the Bank of England and the FSA. Under the plans:
- BOSSES at the FSA will be able to ban banks from paying massive wages and bonuses unless they are making profits.
- BANKS will be forced to hold more cash in reserve - and will have to open their accounts to scrutiny.
- THE Bank of England will publish "risk assessments" of British financial institutions.
- FINANCIAL institutions will be banned from taking part in risky foreign investments such as the notorious US sub-prime mortgage market.
The City has warned that too much regulation could slow its recovery and keep Britain in recession for longer. And Banks say moves to force them to hold cash in reserve will hurt customers.
Angela Knight, chair of the British Bankers' Association, said: "The more capital and liquidity that a bank has to hold, the less they are able to lend."
A number of banks, including RBS - headed at the height of the credit crisis by Sir Fred 'The Shred' Goodwin - had to be bailed out with billions from the Government.
___________
TIME FOR SYSTEM TO CHANGE
THE old banking system led us to this recession, writes Alistair Darling, Chancellor of the Exchequer
We need to learn lessons from the financial crisis in which banks behaved in a kamikaze manner and the regulatory system failed.
Far too many people in boardrooms did not know nor understand what was happening in their institutions.
We know now that no authority in the world understood the true risks to the system or the likely consequences. That needs to change. I want a new banking system we can all rely on and which will be the foundation of our new prosperity.
This week I shall publish the government's thinking on further financial reform so that in future we shall be in a better position to prevent the problems that pose a threat to our prosperity. We will deliver tougher regulation and more rigorous monitoring and managing of system-wide risks so we can make sure we are ready and able to deal with failures when they arise.
Regulators will get powers to do their jobs more effectively, to ask searching questions of the institutions. Businesses need to be able to borrow. Families need to get mortgages. The stakes are high but a stable financial world is a goal we are determined to achieve.
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This article has 2 comments
The worst thing the government did was to remove responsibility for regulation from the BoE in 1997. The toothless FSA was powerless (and prevented by Brown) to effectively regulate the banks.
Its staff come from the banks and their performance appraisals depend on favourable feedback from the same banks the staff are supposed to be regulating.
Now Darling wants to take more power from the BoE (supposedly independent....!) by allowing himself to veto any action it wishes to take?
This is a recipe for a bigger, worse credit crisis in the future.
Time Labour were evicted.
By SianB. Posted July 5 2009 at 12:09 PM.
Darling wants to ban the banks from paying bonuses unless they are making profits.
Pointless window-dressing. Right up until the financial markets walked off the cliff, all banks showed a profit. It was only in the following year (after payment of the biggest bonuses in banking history) that SOME banks paid bonuses.
There were still banks making profits and paying big bonuses. Barclays has just announced it's £1bn plus bonus pot for this year, as it made big profits during the credit crunch (all those strapped consumers using credit cards at 18% pa to survive).
Knowing City culture, the other banks will look to pay similar or better bonuses, to keep staff unemployable anywhere else.
Darling could do better, but won't. These regulations change NOTHING, and the City is already staffing up again. They think it's business as normal and it will be.
By SianB. Posted July 5 2009 at 12:14 PM.