The Great Debate UK

It’s time to call the bankers’ bluff

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OUKTP-UK-BANKS-REGULATION

-Laurence Copeland is professor of finance at Cardiff University Business School. The opinions expressed are his own and do not constitute investment advice. -

I have just reread the blog I wrote for this column last September. A year has gone by, and neither the title – “It’s All Over: the Banks Have Won” – nor the rest of it seem out of date. In fact, last weekend’s Basel III deal looks very much like the final surrender by the authorities.

It is not simply a matter of the feebleness of the reserve requirements and the ease with which they will be emasculated by arbitrage, nor the fact that the regulators have given the banks a few years to satisfy them – “Please Lord, make us prudent…..but not yet”.

Rather, it is the way the banks have so easily fought off any attempt at more radical reform, and in particular their success in silencing the calls to enforce a separation of retail from investment banking and to break up the biggest groups into units which are no longer Too Big To Fail.

from UK News:

Pru’s Asian misadventure: a cautionary tale

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PRUDENTIAL/By Clara Ferreira-Marques

Prudential's ill-fated Asian adventure has left the company and its management badly bruised. But it has offered at least two valuable lessons for ambitious executives tempted onto the acquisition path by post-crisis, "once-in-a-lifetime" deals.

Lesson one: It's not 2007 any more, Toto.

Lesson two: Disregard shareholders at your peril.

On the first, bold mega-deals that once impressed the market now seem to mostly unsettle both investors and regulators.

New UK coalition deserves 7 out of 10

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

The new UK coalition deserves 7 out of 10. The pact between the Conservative and Liberal Democrat parties, led by David Cameron as the new prime minister, seems determined to address the country’s most important problem — the deficit. This is vital given that the euro zone debt crisis could still prove contagious. It should also be positive for sterling.

from Commentaries:

Do banks really need to hoard liquidity?

That's the provocative question posed by Willem Buiter. His latest, characteristically lengthy, blog post tackles the regulatory vogue for forcing banks to hold much greater reserves of liquid assets - in practice, government bonds.

Buiter's missive follows new rules from Britain's Financial Services Authority, which will force banks to increase their reserves of government bonds by more than a third. The rules have been met with predictable bleating from the industry, which accuses the regulator of undermining Britain's competitiveness and promoting the fragmentation of the global financial system. Another concern is the FSA's handling of the transition.

from Commentaries:

Turner is right to take on swollen banks

So the watchdog can bark after all. Adair Turner, chairman of Britain's Financial Services Authority, says the financial sector has "swollen beyond its socially useful size". That is a striking statement for any financial regulator, particularly one that counts promoting London's financial centre as one of its goals. Identifying the problem, however, is the easy bit. Reversing decades of financial expansion will require global agreement on tough new rules, and the determination to make sure they are consistently enforced.

Turner's comments, in a debate hosted by Prospect magazine, underscore the extent to which the crisis has upended the received wisdom among policymakers. For years they assumed markets were self-correcting, that financial innovation brought lasting economic benefits, and that regulators should think twice before getting in the way.

One cheer for Darling’s reforms

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REUTERS– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –

Chancellor Alastair Darling has ignored the first rule of holes: if you’re in one, stop digging. He could have produced a few motherhood-and-apple pie reforms of the banking system, to give the impression of activity. Instead, he has dug in, proposing an upgrade of Britain’s failed “tripartite” system of regulation.

EU funds regulation hits the wrong target

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REUTERS– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –

If generals have a habit of fighting the last war, regulators are prone to fighting the war that they think they ought to have fought.

Barclays’ conjuring trick

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– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –

REUTERSAbracadabra! Yet again, Barclays has pulled another rabbit out of its hat. With just days to go before the end-March deadline for the bank to apply for a government guarantee of its dodgier loans, it may again wriggle out of state control.

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