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Chancellor soft on reckless bankers say Tories
BANKS will have regulators "in their faces" to punish reckless pay deals under Government plans to stop another financial meltdown, but the Chancellor was accused last night of allowing the City to resume "business as normal".
Alistair Darling promised consumers free NHS Direct-style financial advice and a system of health warnings on financial products, as he launched his long-awaited proposals for banking reform to restore confidence after the shockwaves of the past two years.
Despite criticism over regulators' failure to see the banking storm coming, Mr Darling opted to revamp the current tripartite system – involving the Treasury, Bank of England and Financial Services Authority – with more power for the FSA rather than the Bank of England as had been favoured by its Governor Mervyn King and the Tories.
That put the Government on collision course with the Tories who branded some of the measures "totally inadequate" and pledged to tear up the plans if they won the General Election.
Shadow Chancellor George Osborne sad it was "a complete surrender of this Government's responsibility to fix the system of regulating the City", while Liberal Democrat Treasury spokesman Vince Cable said there would be relief in the City that "we're getting back to business as normal".
Revealing his White Paper yesterday – which the Government hopes to get into law before the election – Mr Darling said the plans would "reform and strengthen our financial system and rebuild it for the future".
He condemned "irresponsible pay practices" and the excessive risks taken by financial institutions across the world and said the FSA would be given powers to penalise banks if their pay policies create "unnecessary risk".
It will report each year on whether banks and building societies are operating dangerous pay practices and what action will be taken against them in the wake of fury over bumper pay deals enjoyed by the men in charge of banks which have had to be propped up by the taxpayer.
Regulators will have the right to make banks increase their capital reserves – hitting profits – if they are thought to be taking too many risks or paying bonuses that encourage risk-taking.
"We need a change of culture in the banks and their boardrooms, with pay practices that are focused on long-term stability and not short-term profit," said Mr Darling.
A Treasury spokesman said banks would find the regulator would be "in their faces", although individual offenders would not be "named and shamed".
The White Paper also proposes establishing a Council for Financial Stability – involving the Treasury, FSA and Bank of England – chaired by the Chancellor to act as a watchdog against emerging risks, and increasing the responsibilities of the FSA to intervene with banks.
Banks will be told to hold higher capital buffers and will have to pay up front into a compensation fund to protect savers.
There will be free money advice for consumers – funded by the industry and Government – through a telephone line, the internet and face-to-face meetings with an advisor.
But Mr Osborne called the tripartite regime "dysfunctional" and pledged to scrap it if the Conservatives won power, saying the Bank of England should be given more powers.
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Saturday 11 February 2012
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