Financial Regulatory Forum

BREAKINGVIEWS-Sarkozy’s anti-market rhetoric misconceived

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Hugo Dixon

DAVOS, Switzerland, Jan 28 (Reuters Breakingviews) – Nicolas Sarkozy’s anti-market rhetoric is misconceived. The French president used his address in Davos to blast the untrammelled free market. While the economic crisis has certainly exposed deficiencies in financial capitalism, this is largely because market forces were too weak rather than too strong.

Sarko had some easy targets. Top of the list were bankers. Their “heads-I-win, tails-you-lose” pay practices are an outrage. But these are not the result of the free market operating properly. They are the result of governments and central banks rushing in and bailing the industry out when it runs into trouble.

Sadly the authorities won’t be able to remove their safety nets totally. So part of the solution has to be tougher regulation. But, wherever possible, the discipline of the market should also be strengthened. This means making equity investors, creditors and the bankers themselves suffer before taxpayers are called in — and, indeed, constructing a financial system where banks can fail without causing the whole pack of cards to fold.

Another Sarko bugbear is mark-to-market accounting, the theory being that wild swings in asset prices exacerbated the crisis. But a bigger problem was the failure of banks to recognise losses in their loan books soon enough. If they’d had to account for expected losses during the boom times rather than keeping their loans at face value, they would not have gone so crazy in extending credit.

BREAKINGVIEWS – Goldman bonus delay raises puzzling questions

– The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By George Hay

LONDON, Jan 19 (Reuters Breakingviews) – Goldman Sachs is taking its time, but it’s not clear why. Employees at the investment bank are usually told their annual bonus a few days before full-year results. But even though shareholders will discover the total amount spent on compensation on results day this Thursday, staff must now wait until next week to hear their individual windfall.

Goldman’s own explanation for the delay is that the welter of new regulations in 2009 has caused some slippage in working out individual bonuses. The G20 guidelines and the UK’s 50 percent tax on payouts over 25,000 pounds mean banks have new shackles, while Goldman’s conversion to a bank holding company means its financial year ends in December instead of a month earlier.

Deutsche Bank raises salaries as bonus tax looms

    FRANKFURT, Jan 19 (Reuters) – Deutsche Bank <DBKGn.DE> is raising fixed salaries for staff and cutting variable pay, Germany’s flagship lender said on Tuesday as regulators and politicians pursue a clampdown on bonuses.
   Deutsche Bank said the move arose from a review to ensure pay “remains competitive”.  (more…)

Obama proposes U.S. bank fee, slams Wall Street

By Caren Bohan and Alister Bull

WASHINGTON, Jan 14 (Reuters) – U.S. President Barack Obama on Thursday proposed Wall Street banks pay up to $117 billion to reimburse taxpayers for the financial bailout, as he slammed bankers for their “massive profits and obscene bonuses.”

Striking a populist tone, Obama called for a fee on the biggest U.S banks to “recover every single dime” the government spent rescuing the financial sector from its worst crisis since the Great Depression.

“My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people,” Obama said, reflecting increasingly harsh rhetoric toward the financial industry.

US FDIC floats plan to tie bank pay to fee levels

By Karey Wutkowski

WASHINGTON, Jan 12 (Reuters) – U.S. banks whose compensation plans encourage risk-taking would have to pay more for deposit insurance under a proposal floated by the Federal Deposit Insurance Corp on Tuesday.

The proposal is very preliminary and was contentious even among the members of the FDIC board, which is made up of regulators for different-sized financial firms. The board voted 3-2 to seek public comment on the proposal.

The plan would reward pay structures that tie banker pay to long-term performance and include “clawback” provisions to recoup payments.

Citi could sell $20 billion of shares soon to repay TARP – CNBC

NEW YORK, Dec 9 (Reuters) – Citigroup Inc plans to pay back TARP by raising money in an equity offering that could be announced as early as Thursday and could be some $20 billion, television network CNBC reported, citing sources.

Earlier on Wednesday, the bank’s chairman, Dick Parsons, told CNBC that Citigroup was in talks with regulators about repaying the funds it received from the U.S. Treasury’s Troubled Asset Relief Program.

“We believe Citigroup is in a position to repay the TARP money, but there is an active discussion we have to have with regulators …” said Parsons, who was at New York Governor David Paterson’s speech on the economy on Wednesday at the Museum of American Finance.

No plan yet to extend banker pay rules – UK’s FSA

LONDON, Dec 8 (Reuters) – Britain’s financial watchdog said on Tuesday it had no plans to alter existing curbs on bankers’ bonuses and remuneration, or to extend them beyond the banking sector, until it reviews the rules in the middle of next year.

The Financial Services Authority (FSA) said on Tuesday holding back on change would allow regulators to assess the impact of EU changes and the effects of a banking review published by City grandee David Walker.

The FSA, criticised for failing to address problems that led to a near-collapse of the banking system, laid out its new code of practice on pay in August, including a ban on entering into contracts with individuals which provide guaranteed bonuses for more than one year. [ID:nLC475859]

Facing defeat, UK government targets deficit, bank pay

By Keith Weir and Matt Falloon
LONDON, Nov 18 (Reuters) – Britain’s Labour government promised on Wednesday to halve its huge budget deficit and curb bankers’ pay in the hope of reviving its popularity before a national election next year.

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Swiss regulate bankers’ pay to curb risk-taking

ZURICH, Nov 11 (Reuters) – Switzerland’s biggest banks and insurers will have to adhere to new compensation rules requiring them to defer the bulk of managers’ bonuses and to strictly align pay to performance, Swiss regulators said on Wednesday.

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US bank regulator sees risk in pay czar rulings

   By Karey Wutkowski
CHICAGO, Oct 26 (Reuters) – A top U.S. bank regulator said on Monday that there is “very real concern” that some large financial firms that have received massive taxpayer bailouts could be harmed by the rulings of the Obama administration’s pay czar.Comptroller of the Currency John Dugan said pay czar Kenneth Feinberg has a difficult challenge to both rein in outsized paychecks at the seven firms he has jurisdiction over, while not being so harsh that top performers leave the companies.

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