Summary
The Financial Services Authority (FSA), fearful of being shut down by the incoming Tory government, has indulged in popular politics and made some suggestions that play to the gallery wrt taxing bankers' bonuses.
This suggestion is a non starter, as Britain (like it or not) needs a robust financial services industry, given that it has no manufacturing base to speak of.
Analysis
The Financial Services Authority (FSA), fearful of being shut down by the incoming Tory government, has indulged in popular politics and made some suggestions that play to the gallery wrt taxing bankers' bonuses.
Lord Turner, the chairman of the FSA, has stated in a discussion in Prospect magazine that he would be happy to consider the use of a new tax on banks to prevent excessive bonus payments.
He was quick to point out that the FSA was "not setting out any new policy", a that of course is a matter for the chancellor.
Lord Turner wants a tax on financial transactions that would cut banks' profits, thus reducing the funds available for bonuses.
Lord Turner's, and the FSA's conversion to cutting bankers' bonuses, may well play well to the gallery. However, it was during the watch of the FSA that the banking crisis (allegedly a result of greed and high bonus payments) occurred.
Where were the FSA then?
Lord Turner, the chairman of the FSA, has stated in a discussion in Prospect magazine that he would be happy to consider the use of a new tax on banks to prevent excessive bonus payments.
He was quick to point out that the FSA was "not setting out any new policy", a that of course is a matter for the chancellor.
Lord Turner wants a tax on financial transactions that would cut banks' profits, thus reducing the funds available for bonuses.
Lord Turner's, and the FSA's conversion to cutting bankers' bonuses, may well play well to the gallery. However, it was during the watch of the FSA that the banking crisis (allegedly a result of greed and high bonus payments) occurred.
Where were the FSA then?
The irony of the FSA's tirade against bonuses being that the FSA has awarded itself, or rather 20% of its staff, a 10% pay rise.
Despite the fact that its expenditure exceeds its income, by around £23M, the FSA justifies this largess as "necessary" compensation for the closure of its final salary scheme to existing members.
This is the same FSA that lectures banks etc against bonuses and unrealistic pay awards.
Despite the fact that its expenditure exceeds its income, by around £23M, the FSA justifies this largess as "necessary" compensation for the closure of its final salary scheme to existing members.
This is the same FSA that lectures banks etc against bonuses and unrealistic pay awards.
As I noted in my article "Royal Bank of Scotland To be Spot Checked - Who Cares?" during the FSA's existence the British economy has endured ao:
Regarding the FSA's feeble attempt to save itself from the gallows, wrt its taxation suggestion; unless there is a unified worldwide tax on banks, all that will happen (in the event that such a tax is introduced in the UK) is that the banks will move elsewhere.
This suggestion is a non starter, as Britain (like it or not) needs a robust financial services industry, given that it has no manufacturing base to speak of.
- the ongoing endowment mortgage scandal
- PPI mis-selling
- excess credit card interest rates
- excess bank overdraft charges
- profiteering mortgage default charges
- the collapse of Northern Rock
- wanton value destruction at RBS, Lloyds Banking Group (NASDAQ:LYG) and Halifax Bank of Scotland (HBOS)
- the near collapse of the banking system
- the ongoing credit crunch
- the Ponzi scheme of subprime toxic debt sales and resales, masterminded by US banks and foisted onto a gullible greedy banking sector in the UK
A record that speaks for itself, and one that lends itself to the view that the financial services industry in the UK does not care one jot what the FSA does or says.
Regarding the FSA's feeble attempt to save itself from the gallows, wrt its taxation suggestion; unless there is a unified worldwide tax on banks, all that will happen (in the event that such a tax is introduced in the UK) is that the banks will move elsewhere.
This suggestion is a non starter, as Britain (like it or not) needs a robust financial services industry, given that it has no manufacturing base to speak of.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
