FSA chief: ‘We need to move beyond demonisation’
By Peter Wozniak
Excessive bonuses were merely a symptom of “ill-designed” regulation which caused the economic crisis, the head of Britain’s financial watchdog has said.
Lord Turner, chief of the Financial Services Authority (FSA), conceded that bad banking practices were a contributor to the crash, and argued executives could have done more to avert disaster.
“There were some absurd bonuses for people not doing terribly clever things but simply taking excessive risks with other people’s money”, he said.
However, Lord Turner warned against boiling the entirety of the crisis down to the greed of bankers, saying “we need to move beyond the demonisation” of traders.
The head of the watchdog, which was much-maligned for failing to tackle the practices which led to the financial crisis in 2007, appeared to argue that the focus had shifted too much on the actions of bankers themselves, rather than the overall regulatory system.
“Far more fundamental than these surface phenomena… was an entire philosophy of market regulation which was embraced by policy-makers throughout the world… which failed to identify or adequately address the dangers… which far too confidently relied on supposedly efficient and rational markets to magically produce results”, he argued.
The comments, made last night, come as the business secretary Vince Cable, with the apparent support of No 10, makes a vehement speech to the Lib Dem conference condemning the actions of risk-takers in the City.
“Markets are often irrational or rigged. So I am shining a harsh light into the murky world of corporate behaviour”, he will say this afternoon.
“Why should good companies be destroyed by short term investors looking for a speculative killing, while their accomplices in the City make fat fees? Why do directors forget their wider duties when a fat cheque is waved before them?”
The coalition government has indicated a tougher stance on banking regulation, with Dr Cable’s speech accompanied by the deputy prime minister’s comments yesterday railing against continuing “obscene” bonuses.
