I struggle to see any logic behind the European Parliament’s latest initiative to crack down on financial industry pay, beyond a dislike of bonuses. The idea that investment funds should be treated similarly to systemically important banks has even less merit than the original idea.
The basis on which the EU proposed to rein in bank bonuses – despite UK opposition and criticism from supervisors including Andrew Bailey, the incoming head of the Prudential Regulation Authority – was that excessive bonuses gave bankers a perverse incentive to take risks. Read more
The article by Erin Callan, former chief financial officer of Lehman Brothers, on how she lost herself in work, is an interesting reflection not only on women on Wall Street, but also on how relentlessly many bankers work.
Ms Callan, who lost her job in 2008 “amid mounting chaos and a cloud of public humiliation only months before the company went bankrupt”, writes in the New York Times of the extreme work culture at the top of the former investment bank: Read more
There are plenty of interesting ironies raised by the news that investment banks are charging asset managers up to $20,000 an hour for access to chief executives, often unbeknown to the executives themselves.
One is that chief executives themselves are no strangers to “cash for access”. It’s a perennial political “scandal” that big corporate donors to political parties get to rub shoulders with the prime minister or his cabinet at private parties and dinners. The last time such a hoo-ha erupted, in 2012, the FT wrote that prominent City figures were “bemused at the outrage” surrounding the affair, describing it as “a healthy part of the democratic process”. One said: Read more
What strikes me about the findings of the UK Competition Commission’s inquiry into the audit market is that in a world of ever more rapid change, a company’s relationship with its auditor is now often the oldest fixture in the boardroom.
Think about it. The commission says 31 per cent of blue-chip FTSE 100 companies have had the same auditor – almost invariably one of the “Big Four” – for 20 years or more. During that period, on average, most companies will have changed their chief executive at least four times, their non-executive board members (assuming replacement at the nine-year mark, when they lose their independence according to UK guidelines) twice, and their computer systems probably five or six times. Read more
If I were a mastermind seeking to undermine the City of London, I would shift Germany’s financial centre from Frankfurt to Berlin, just as the country moved its political capital from Bonn in the 1990s. Then it would be part of a cosmopolitan city where foreign bankers and lawyers might actually want to live.
As an old student of HSBC – or, as I prefer to call it, Hongkong and Shanghai Banking Corporation – I found Stuart Gulliver’s remarks about the inadequacy of its structure following the Mexico money laundering scandal fascinating.
HSBC’s chief executive told the Parliamentary Commission on Banking Standards on Wednesday:
“Our structure was not fit for purpose for a modern world. Our geographic footprint became very attractive to transnational criminal organisations, whether they are terrorist in origin or criminal in origin.”
Adam Posen’s attack on the management and culture of the Bank of England may be the strongest yet, but it is by no means the first – and won’t be the last – criticism of a persistent and dismaying lack of robust governance at the UK central bank.
What is astonishing is that despite countless warnings – three independent reviews, several newspaper editorials and sundry MPs’ warnings – the central charge that the governor is over-mighty and under-governed still stands. Read more