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Who’s best for banks?
In the long, nervy run-up to the Election, parties are understandably reticent about their manifesto plans for banking. But KEITH AITKEN already senses some clear differences emerging in several areas of reform.
This just in: anyone eager to find kindly and approving sentiments about the banking profession should probably look elsewhere than to the forthcoming general election hustings.
Elections are when politicians are more ready than ever to say populist things about popular perceptions. And they see good mileage yet in trading competitive ruderies about the reputed economic culpability, financial irresponsibility, and personal venality of banking’s demotic demons.
How does this ritual translate into post-election public policy? Some showy ideas are being floated – Tory George Osborne’s plan to sell-off government holdings in small discounted bundles as a “people’s bonus”, for example.
But, as Chartered Banker goes to press, surprisingly little detail is yet public about what the manifestos will say. So we approached all the parties about their stance on three key issues: • professional standards to help restore public trust • regulatory reform in the UK and international arenas • banking structure – whether to split retail and investment functions.
We were not astonished to meet with some understandable pre-manifesto reticence. The table opposite therefore reflects a mix of direct responses and recent public statements. And they show some quite clear differences opening up in several areas of reform.
Though these are matters mostly governed by powers reserved to Westminster, our questions were also directed to the nationalist parties in Wales and Scotland: both are in power and on their respective ballot papers; both aspire to fuller control; both have a natural and lively interest in the health of their financial sectors.
Should there be formal professional standards or qualifications for bankers to help rebuild public trust?
The Government backs Sir David Walker’s report calling for more systematic training of bank directors, and Alistair Darling criticises a “culture” of amateurism among senior bankers: “Too many people around board tables did not ask the right questions; some chief executives did not fully understand the risks being taken by their traders.”
Tory leader David Cameron says that bankers who behave irresponsibly should face “professional consequences”, drawing a parallel with doctors being struck-off.
No declared policy, but a general belief in greater transparency. Treasury spokesman Vince Cable wants the Walker Report recommendations given statutory force.
The SNP says that, while it may not be necessary for every banking employee, it “sees merit in ensuring that those who make large investments that affect thousands of normal people’s pensions and savings are required to have a professional qualification”. Plaid Cymru says: “It sounds like a good idea.”
What main changes would you make in our domestic regulatory regime, and what would you seek internationally?
Alistair Darling says regulation “needs to be more intrusive and needs to ask harder questions”. The Chancellor also complains about the slow pace of the Basel international reforms. City Minister Lord Myners says: “We do not support new powers for EU authorities to change national supervisory decisions. It could undermine crisis management and fiscal accountability.”
They would restore prime regulatory responsibility to the Bank of England, believing the current tripartite regime with the FSA and Treasury is “blurred and inefficient.”
Vince Cable says that “while Britain can try to regulate separately, many financial services activities require global – or EU – regulation”. He adds: “We favour a co-operative approach to regulation … sensible and safe bank regulation has to begin, like charity, at home”.
The SNP says: “We will work closely with Scotland’s financial services sector to ensure that Scotland’s legitimate interests in the emerging EU regulatory arrangements are fully understood in negotiations between the UK Government and the EU …There are genuine fears that joint regulation is not moving at the pace that is necessary to safeguard the future of the industry.”
Should there be a division between the retail and investment functions of banks?
Alistair Darling says: “I’ve always thought that to separate banks doesn’t deal with the full problem… It is the connections between institutions that cause problems, not the legal entity.”
Shadow Chancellor George Osborne agrees “wholeheartedly” with the US Volcker Plan to split up the functions of the banks.
Vince Cable comments: “We’re committed to splitting up the banks, but have an open mind on the mechanisms involved. The essential point is that, within a realistic time frame, the British taxpayer has to be totally disengaged from the risks involved in global investment banking.”
The SNP says: “Any knee-jerk reaction toward such a separation would require much more careful consideration.” Plaid Cymru says its policy “will focus on the need to separate high street and investment banks and the regulation of bankers’ bonuses by law”.
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