UK News

Financial regulation plan: white paper or white flag?

Chancellor Alistair Darling set out new plans to strengthen regulation of financial markets on Wednesday. The white paper proposes enforcing higher levels of capital for banks and increasing liquidity to prevent a re-run of the credit crunch.

Darling wants banking pay packages to be policed and for a new Council for Financial Stability to bring together the work of the Bank of England, Financial Services Authority and the Treasury.

Although the “tripartite” setup under which the finance ministry, Financial Services Authority and Bank of England supervise the financial markets was widely seen as failing to spot problems at Northern Rock and other banks early enough, Darling has decided not to scrap it.

Shadow Chancellor George Osborne called the Labour plans “more of a white flag than a white paper” in a rebuttal in parliament.

“The next Conservative government will abolish the tripartite system and will put the Bank of England in charge of the banks . . . and other financial institutions because you cannot separate central banking from the financial supervision system,” he said.

What do you think, are the new plans more of a white flag than a white paper? Are the Conservatives on the right track or should the tripartite system be retained?

from The Great Debate UK:

Greenbury’s Damascene conversion

-- Neil Collins is a Reuters columnist. The opinions expressed are his own --

Sir Richard Greenbury has had a Damascene conversion. The former boss of Marks & Spencer tells The Times that he's now in favour of continental-style two-tier boards, contrary to his own report into corporate governance 14 years ago.

The old bruiser thinks this would have prevented the emergence of the likes of Sir Fred Goodwin, the reviled former boss of Royal Bank of Scotland whose non-executive directors were too weak to question his o'ervaulting ambition.

Coming from him, this is rich indeed. When he was both chairman and chief executive of M&S, there was never the slightest doubt about who was calling the shots. No detail was too trivial for the great man to impose his view.

This style of management drove profits up, for a time, but he pushed up prices until the customers deserted and when the margins could not be stretched any further, the company's fall from its pedestal was spectacular.

He was forced out by the major shareholders, exposing the lack of any succession planning. It was only the threat of a bid from Philip Green that pushed the board into asking the obvious outside candidate, Stuart Rose, to become chief executive.

The Greenbury Report was, of course, commissioned in response to a public outcry over corporate greed. The numbers look positively parsimonious compared to today's, but plus ca change...

from The Great Debate:

New rules won’t end London’s golden lure

-- Alexander Smith is a Reuters columnist. The opinions expressed are his own --

New regulations may be cooked up to curb the excesses of its bankers but London will always attract those who believe its streets are paved with gold.

Some predict that the financial crisis spells the end for London as a major global financial centre, arguing it has thrived on lax regulation and a quasi-tax haven status and that the regulatory backlash which inevitably follows such a catastrophic economic debacle will suffocate the innovation and the financial incentives which have driven the growth of services in the British capital.

But these doomsters are overlooking key factors which have made London a world hub for centuries. London's geographical position -- most notably Greenwich Mean Time -- has served it well as a bridge between the time zones, its almost unrivalled cultural diversity, its global outlook, the advantage of English as the common language of finance and not least the trading and financial heritage it has built up since Roman times.

Throw in the advantages of maintaining its own currency during a period of downturn (particularly when a weaker pound gives it an economic advantage) and London is well served alongside New York and Singapore, Hong Kong or Tokyo when competing with other centres which have harboured global ambitions such as Frankfurt, Paris or more recently Dubai.

The City of London, also known as the Square Mile, which immodestly by British standards bills itself as "the world's leading financial centre" also clings to a host of antiquated traditions whose quaintness, including the appointment each year of a Lord Mayor, remains a tourist draw if nothing else.

Another factor in London's immediate favour is the infrastructure spending which is taking place to coincide with the Olympics in 2012. The massive Crossrail project will link the capital's east and west, while despite constant carping from its users, the underground "Tube" network is undergoing a major upgrade to bring it into the 21st Century. The lure of the capital's arts and culture, its shops, restaurants and pubs all combine to keep people coming to visit and to live and work.

Web round-up: Reaction to FSA’s bank regulation proposals

The Financial Services Authority (FSA) has published a blueprint for a shake-up of global banking regulations aimed at preventing a repeat of the current financial crisis. The report, authored by FSA Chairman Adair Turner, recommends an increase in banks’ minimum capital requirements, closer regulation of hedge funds as well as proposals to stop banks lending too much during boom years and measures to restrict the ability of banks to take excessive risks.

The report comes a week after FSA Chief Executive Hector Sants said in a speech at Thomson Reuters London offices that the banking sector should be “very frightened” of the regulator.

Here is a quick round-up of how the FSA’s blueprint has been received across the web.

Robert Peston, the BBC’s Business Editor, writes on his blog that much of what the FSA Chairman said was “common sense” and that “some of its gleaming new rules would in fact represent a return to a framework for limiting risk-taking by banks that prevailed until comparatively recently.”

There was also a good discussion about the FSA and international banking regulation on this morning’s Today programme on BBC4, which you can listen to here if you missed it.

Over on the Telegraph, meanwhile, Simon Denham comments that: “The new “aggressive” stance from the FSA is a legitimate reaction to the howls of outrage – some justified and others totally misplaced – about the moral and managerial turpitude within the City.

“But it remains to be seen how this will translate into action. The worst case scenario would be for regulation to become unduly cumbersome, slow the mechanisms of the City and hinder any wider recovery for the economy. That said… Lord Turner’s report is a golden opportunity for the regulator to really get behind financial services.”