FT.com / Companies / Banks - Banks fear effect of FSA rule changes.
The trade body for banks will tell the Financial Services Authority today that proposed changes to capital and liquidity requirements do not “strike the right balance”.
The British Bankers’ Association says in a letter to the regulator there must be an urgent assessment of the costs of complying with the new rules.
In the letter to Hector Sants, the FSA’s chief executive, Angela Knight, head of the BBA, says forcing banks to hold more capital, and a higher proportion of funding in liquid form, will constrain balance sheets as banks are being urged to lend more to cash-strapped companies and individuals.
This, of course, fits with the theme of most of today's blogs: the City simply refuses to believe they must change as a result of what happened last year.
They want Humpty Dumpty back on the wall again.
He's bust. He can't go back. Change has to happen. Bankers have to be reigned in. Glass Steagall is needed.
We will not go forward whilst we remain committed to the old model of Anglo Saxon capitalism.
What worries me is how many civil servants in the Treasury still believe in it.
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This isn’t surprising as the UK, USA and other European governments use tax payers money to insulate bankers from their errors.
The whole point of capitalism is that natural selection results in competence. The last 30 years have seen businesses in the West doing their best to insulate their CEOs from the consequences of their errors with golden handshakes, golden parachutes and enormous bonuses even for failure. The insurance and pension companies joined in by circumventing shareholder oversight, and now we have the mantras of “too big to fail” and “save the financial services for the common good” ensuring that capitalism is broken.
The result will be that perverted capitalism will break the finances of a number of western countries.
Capitalism needs fixing.
What about “Balanced Capitalism” as a means to fix things?
FROM THE EXISTING HIGH-PRESSURE WORLD of finance, it would surely be desirable to have a mechanism for automatic diversion of part of commercially-created money if it could be for anti-inflationary [Note 1}, long-term climate protection needs .
The credit creation system offers the perfect opportunity, now that instability issues are being discussed. So a credit creation charge might be a timely way to achieve a stabilising flow of revenue from the top-heavy, most-profitable [note 2] world of high finance. We would then need a mechanism for efficient distribution, suggested below – fairly funding projects directly.
In Australia and Canada the GST is at 10%. In the UK VAT has been brought down to 15%. But none of these countries have a mechanism that allocates ring-fenced funds against climate change. Meanwhile congestion caused by cars has declined little since the credit crunch. They are still using up the limited fossil fuels that China and India will soon be even more rapidly eating into. And sea levels will more rapidly rise.
So energy transition and climate change adaptation measures could both be massively assisted by the simple means suggested here. Part of it has already got muted praise from Whitehall and by the Bank of England. Earlier STEER (ETI -note 4) was supported as an option by the Earth Policy Institute in the USA – a lead author in Earth from the Air that brought matters sharply into focus. For example the decline in value of trade received from increased volumes from those with weak currencies (50% drop in value 1990-2000).
[ Note 1 “Long-term investments can be less inflationary” Central Planning Economic section official (Netherlands), Dr Nick Zubanov. Email note.
Note 2: In a recent paper by the ACCA accounting group (the one with ethics as a core principle) McKinsey are quoted to have found that “global banking profits in 2006 were $788 billion; this was over $150 billion greater than the next most profitable sector: oil, gas and coal. Global banking revenues were 6% of global GDP and its profits per employee were 26 times higher than the average of other industries.” (Corporate Governance and the Credit Crunch ACCA 2008) (Our emphasis — these profits are after high expenses).]
This started me in my search for solutions to currency value problems. I hope you too will find them good, and send back a comment.
We have embarked on a book that must be out by September 2009, hopefully a short TV series to follow. In it we are describing how currency value has been at the heart of a series of global problems: from global terrorism to inadequate protection of the agricultural and other land turning to desert, to our own starvation of funds that should have automatically gone towards infrastructure costs (otherwise increasing taxation) and that would protect the roads from congestion.
The ordinary man, the business man and the teenager struggling to make sense of the world will read this book! So should government policymakers and academics! It offers the mechanism by which the Green New Deal [note 3] can be made a reality instead of another forgotten report. In it we will show that a simple diversion of a lot less than half of currently-created credit money that has been a source of extreme profit to banks can be used to assist the introduction of an ETI [note 4 (or simplified, VAT)] fundamental alteration to the means of distribution.
By making the money flow automatically and ADJUSTABLY to investments, rather than consumption; direct to projects, rather than through government bureaucracy, we may have the magic bullet partially described above and help everyone including banks, insurers, re-insurers and EMPLOYERS/EES.
Simply put, the VAT would be brought further down to 10% and the EET [note 5] or ET brought in alongside at 10%. The offset needed to protect the vulnerable from the effects of that tax (amounting to 2.5% net increase in UK) would be diverted from banking as mentioned in the first few lines above to help simplify the myriad of taxes: by sending the base rate on any new money to the public purse via the Central Bank.
NOTE 3: New Economics Foundation et al (2008) [NEF said any credit creation charge should be hypothecated].
NOTE 4: Environmental Tax on Imports published as part of Stern Review and Treasury Select Committee 2007/14 found some favour by suggesting an automatic return to producer nations direct to sustainability projects.
NOTE 5: EET previously described as Environmental Tax on Imports (ETI) might be renamed the Environment and Energy Tax (EET) and ring-fenced for renewable energy, sustainable transport and super-insulation etc.
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Contact Ian Greenwood +44 (0)121 449 0278 STEERglobal.org