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| More City reforms needed, Bank of England governor tells forum | More City reforms needed, Bank of England governor tells forum |
| (about 1 hour later) | |
| The Bank of England governor declared the age of “heads-I-win; tails-you-lose capitalism” was coming to an end, eight years after the financial crisis that led to £65bn taxpayer bailouts of major banks and raised questions about the purpose of the City. | The Bank of England governor declared the age of “heads-I-win; tails-you-lose capitalism” was coming to an end, eight years after the financial crisis that led to £65bn taxpayer bailouts of major banks and raised questions about the purpose of the City. |
| Mark Carney told an audience of bankers, academics and members of the public that despite a series of changes to the way the City operated there was still more to be done. Some rules may need to be rethought, he said. | Mark Carney told an audience of bankers, academics and members of the public that despite a series of changes to the way the City operated there was still more to be done. Some rules may need to be rethought, he said. |
| “The era of heads-I-win; tails-you-lose capitalism is drawing to a close. Complex webs of derivatives are being simplified and made safer. We are also working to turn the tide of ethical drift,” Carney said. | “The era of heads-I-win; tails-you-lose capitalism is drawing to a close. Complex webs of derivatives are being simplified and made safer. We are also working to turn the tide of ethical drift,” Carney said. |
| He was speaking at the start of an initiative by the Bank to justify the purpose of financial markets in the wake of the banking crisis and market-rigging scandals in the interest rate and current markets. These events had shown the markets were “fragile, unfair, ineffective and unaccountable”. | He was speaking at the start of an initiative by the Bank to justify the purpose of financial markets in the wake of the banking crisis and market-rigging scandals in the interest rate and current markets. These events had shown the markets were “fragile, unfair, ineffective and unaccountable”. |
| He added: “Market benchmarks have been reformed to end abuse. Most importantly, market participants are being made accountable for their actions. Misconduct will be met with genuine penalties. By holding individuals accountable, authorities are ending the age of irresponsibility.” | He added: “Market benchmarks have been reformed to end abuse. Most importantly, market participants are being made accountable for their actions. Misconduct will be met with genuine penalties. By holding individuals accountable, authorities are ending the age of irresponsibility.” |
| Carney unveiled the need for the so-called Open Forum at the Mansion House speech in July when he set out the need for 10-year prison sentences to clamp down on bad behaviour. | Carney unveiled the need for the so-called Open Forum at the Mansion House speech in July when he set out the need for 10-year prison sentences to clamp down on bad behaviour. |
| He told the audience – which included George Osborne – that “today is a chance to take stock and reflect: not just on our achievements but on what we might have missed, overdone, or simply got wrong. | He told the audience – which included George Osborne – that “today is a chance to take stock and reflect: not just on our achievements but on what we might have missed, overdone, or simply got wrong. |
| “Given the complexity and scale of financial reform, it would be remarkable if every measure were perfectly constructed. Or if they all fit seamlessly into a totally coherent, self-reinforcing whole. Authorities must have the courage to listen, the honesty to admit our mistakes and the confidence to set them right,” he said. | “Given the complexity and scale of financial reform, it would be remarkable if every measure were perfectly constructed. Or if they all fit seamlessly into a totally coherent, self-reinforcing whole. Authorities must have the courage to listen, the honesty to admit our mistakes and the confidence to set them right,” he said. |
| Osborne said that bankers making bigmoney on trading floors needed to think again if their behaviour was unethical. “If anyone thought that being unethical in the financial services industry is a good way to make money I suggest they look at the very big fines” levied on the industry,” he said. | Osborne said that bankers making bigmoney on trading floors needed to think again if their behaviour was unethical. “If anyone thought that being unethical in the financial services industry is a good way to make money I suggest they look at the very big fines” levied on the industry,” he said. |
| The Chancellor said he understood the public’s anger in the wake of the banking crisis. The punishments for shoplifters, he said but “if you rip off people to the tune of millions of pounds, there are no criminal offences”. He had now changed the rules, he said. | |
| Carney also spoke of wanting to avoid the booms and bust of the past. “We’re determined not to repeat the cycles of the past when bursts of post-crisis reforms would eventually drift into complacency and cohabitation,” he said. “When the caravan moved on, markets were left unattended to slip slowly into excess and ethical drift.” | |
| Carney said: “The twin crises of the solvency and legitimacy of finance undermined trust in market mechanisms and the effectiveness of the financial system. It is hardly surprising that only a third of people believe markets work in the interests of society. The more people see, the less they like. People trust markets less with age”. | |
| “We all have a responsibility to stop this from happening again,” Carney added | |
| Just a handful of the 400-strong audience - including 200 members of the public who won their place in a ballot - raised their hands when asked it if was case of “job done” in terms of regulatory reform. | |
| Tracey McDermott, acting chief executive of the Financial Conduct Authority, was asked if the regulator was going soft on the City after imposing a wave of fines and compensation payouts. “What we do want the world to look like going forward,” she said. “We can’t have a sustainable regulatory framework, can’t have customer trust... unless we are actually starting to look ...at what we want the future to look like,” she said. But, she also said, it was important that regulatory momentum was maintained. | |
| Sir Howard Davies, chairman of Royal Bank of Scotland, said he had noted the regulator was going soft but that there had been a change of tone. He said the bailed out bank had done more soul searching that most about the “social licence” of bankers. “You know when you don’t have [one],” said Davies. | |
| RBS, 74% owned by the taxpayer, is now operating on the basis of sustainable banking. The bank was asking if it was a bank that would survive another crisis and if its customers would keep coming back. | |
| The chancellor said the government had introduced changes to the financial regulation – giving the Bank of England responsibility for regulating banks – and making bankers more accountable. The changes would mean that the next Chancellor who had to deal with a crisis would not have to resort to a taxpayer bailout. | The chancellor said the government had introduced changes to the financial regulation – giving the Bank of England responsibility for regulating banks – and making bankers more accountable. The changes would mean that the next Chancellor who had to deal with a crisis would not have to resort to a taxpayer bailout. |
| Osborne pointed to fintech – growth in the financial innovation sector – - to boost growth in the City. He said he had appointed accountants EY to conduct a review to benchmark the UK against the rest of the world. He added that Andrew Bailey, the Bank of England’s deputy governor, was also writing to the Treasury to make it easier for new banks to set up. | Osborne pointed to fintech – growth in the financial innovation sector – - to boost growth in the City. He said he had appointed accountants EY to conduct a review to benchmark the UK against the rest of the world. He added that Andrew Bailey, the Bank of England’s deputy governor, was also writing to the Treasury to make it easier for new banks to set up. |