In the midst of a financial downturn, the UK government is planning to tighten regulation of its banking sector, including greater oversight of bonuses paid to staff. Alistair Darling, Finance minister of UK, has introduced a legislation to create a Council for Financial Stability, bringing together the Bank of England, financial watchdog FSA and the Treasury – reported SG Private Banking.
Dismissing calls to limit the size of banks in the House of Commons, he said that banks should maintain ample capital reserves as a buffer against any failure, so that customers would get more protection.
On the exorbitant compensation packages that are attracting intense criticism, Mr. Darling said: “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. The Financial Services Authority (FSA) would be handed a new role of maintaining financial stability, with tougher powers and penalties against misconduct.”
However, industry experts are unhappy with the government’s decision of not splitting the troubled banks. Stephen Spratt, Chief Economist at New Economics Foundation, commented: “We have only 170 bank branches per million people in the UK, compared to 520 in Germany and 960 in France. This is hampering our recovery and undermining enterprise and will only be worse after the crash unless the government sets out plans to break up the failed banks to create the new regional banking system we so urgently need.”
