As the FT notes this morning:
UK regulators will include banks' and insurers' senior non-executives alongside chairmen in a tough new personal liability regime to be unveiled on Monday that the City fears could deter able people from taking top roles in the industry.
The Bank of England unveiled proposals last July for a new code for senior bankers and insurers that would sanction, even jail, executives when things go wrong on their watch. It would bring in a potential criminal liability under a new offence for reckless decisions causing a financial institution to fail.
I do not think people will be deterred from taking roles in banking. Cash talks.
What I do believe very likely is that when people realise that there is personal risk attached to the decisions they take and the folly they permit then better scrutiny will happen. And that is precisely what is needed.
Professional people have long known that they face such risk. It's time bankers did the same, but moral hazard is something they have long sought to deny but have been masters in the art of using. If that is reduced this law is very welcome. And in the meantime top free-loading talent may now need to look elsewhere.
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The only talent these proposals will deter is man’s almost bottomless talent for greed.
As Christine Lagarde said (and I paraphrase) ‘Modern Bankers tend to help themselves instead of helping others’.
Let us be equally frank: Supposed ‘market making’ in the financial sector (including banking) up to 2008 was activity made up of some real shady practices. The sub-prime fiasco was even called ‘ a gigantic Ponzi scheme’ by none other than Martin Wolff of the sedate and rational Financial Times.
So yes – we do need to make these beneficiaries more accontable and therefore liable for when things go wrong. But I would also like to see the banks made once again to hold back worst case scenario sized reserves to bail THEMSELVES out from on and not rely on the tax payer as our wonderful Tory and Lib-Dems seem to think (as far as I can see, they think that Government budget surpluses should be used for ‘rainy day’ bail outs – transfeerig public money into private hands).
I think it has become abundantly evident that you can Write and discuss new laws to discourage the game-playing around tax till you are blue in the face but if the politacal will to enforce these bits of waffle is not there then exactly nothing will happen and the foxes will keep robbing the the hen-coop. The current situation portrays that perfectly.
So we have to keep trying to change the political will