ABI Conference: Turner Cracks Down, Osborne Milks Votes, Pay Consultants Take A Beating
Just yesterday we were fretting about the pace of payback to the Treasury allowing the banks to run ahead of planned regulatory reform, and as if to answer our prayers, Lord Turner’s reminding us that he’s all over that issue like a rash. He said yesterday that the City needed more regulation and less deregulated competitiveness: “We are interested in competitive markets rather than competitiveness”.
He’s referring to the fact that over the last few years, the City has been competitive for competitive’s sake – luring in business like hedge funds to operate in this country with the carrot of deregulation, and then finding that those businesses didn’t really contribute to the financial health of the country. “What we have just been through shows that getting it wrong in a prudential sense was so costly economically that you would have to believe the competitive advantage was extremely strong for it to have been worth it”, as Turner put it. In other words, go to the $500 poker table in Switzerland if you want to gamble; the UK is going to be playing the dollar slot machines like an old biddy from now on.
He made the remarks at a meeting of the Association of British Insurers, where he also said that insurance didn’t need the same level of regulatory change as the banking sector. Way to work the room, Turner!
Also at the ABI conference was George Osbourne, who didn’t miss the opportunity for some electioneering. He warned against “badly designed new regulation” that would “needlessly undermine London’s competitive advantage”, thus pleasing the deregulation-heavy crowd while remaining entirely committed to regulation. He mostly focused his ire instead on – controversial! – bank bonuses. “The banks should be using their profits to rebuild their balance sheets, not to hand out huge bonuses while the rest of the economy picks up the pieces for the follies of finance”. Mmm, nice alliteration at the end there. Oh and don’t forget, “The election of the Conservatives is the safer choice for a strong recovery“.
But he is sort of right about not wanting to drive companies out of the City. Say what you like about the financial services industry, but it’s the closest thing Britain has to “industry” these days. Darling’s budget made some mild trumpeting of the creative industries and green tech being big wows for the UK economy, but what’s really kept the UK a viable force on the global map is its status as one of, if not the centre for the global economy. Turner has to steer the City between being a hermetically sealed place that no-one wants to do business in and a rampant free-for-all whose risks endanger the rest of the UK’s economy.
Elsewhere at the conference, the compensation debate raged in a slightly less politically charged way. Pay consultants, the people from a third party that come in and advise on how best to remunerate executives, bore a tongue-lashing from two top fund managers. “The compensation arms race that we’ve had in remuneration, driven by pay consultants, is neither viable, tenable, appropriate nor desirable”, said Mark Burgess of Legal and General.
Robert Talbut, of Royal London Asset Management: “We’ve all got a problem with those organisations that operate in the background. It’s not desperately clear who they are working for and it seems that they operate on the basis that the best advice to give executives is that they are massively underpaid… The idea that the incentive needs to be huge to elicit the right kind of behaviour is wrong. Institutional investors have got to get more used to saying ‘no’.” Is the world of pay consultancy thriving on a culture of finding a way to please their clients by recommending massive remuneration? If so, that stinks.
Oh, and no-one can afford insurance any more during the recession. Cue frantic lobbying from the ABI.
Posted by Ben Beaumont-Thomas in Hot Money | June 10, 2009 11:06AM |