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ePolitix.com Stakeholders comment on Lord Turner's review of financial services regulation.
Lord Turner, chairman of the Financial Services Authority, outlined a series of recommendations designed to prevent another failure of the financial system. As part of his investigation, Lord Turner suggested that banks need larger amounts of capital in order to support unstable trading activity.
And he proposed forcing financial institutions to follow a new code of conduct on pay, by incorporating the guidelines into the FSA rulebook. Read more.
The Turner review: a regulatory response to the global banking crisis
Stakeholder Response: Association of British Insurers
Stephen Haddrill, the ABI's director general, said: "This is an important contribution, which could be a significant step towards improving regulation. Central to any reform is the need to restore confidence to both consumers and financial markets.
"We need a supervisory and regulatory system which supports good quality, trusted banks and other financial services companies in open, competitive markets. The global nature of businesses in London must be preserved."
Pan-European regulator:
"Lord Turner's recommendation for a European Regulatory Authority is a welcome acknowledgment of our arguments that we need more effective cross-border supervision. A supervisor of supervisors, covering the 27 members of the Single European Market, will greatly benefit UK insurers, the largest insurance sector in Europe. However, we believe the FSA should go further and support such a body having the powers to settle disputes between regulators over cross-border companies."
Prudential supervision:
"Better prudential supervision of financial firms is essential to the health of financial services and we agree with Lord Turner that the Tri-partite arrangement is the best vehicle to achieve this. However, it needs better co-operation and to take into account macroeconomic factors in its judgements. We welcome Lord Turner's recognition that regulators must not call for more capital than is needed, as this will reduce bank lending and economic growth."
Remuneration:
"Employees must not be incentivised to take excessive long-term risks for short-term gain. If remuneration policies are adopted which make firms riskier, regulators have legitimate cause for tightening up prudential standards."
Accounting:
"While there is an important debate to have around the role of financial reporting in the crisis, it must be remembered that accounts are for investors and not for regulators, who have much stronger powers to obtain information about a company's financial strength."
Stakeholder Response: Council of Mortgage Lenders
Michael Coogan, CML director general, said: "We welcome the opportunity to explore the pros and cons of limitations on products in a rational way. And we agree that this needs to be done alongside an assessment of alternative ways of regulating to achieve the same risk-mitigating objectives.
"We see the FSA's September paper on the future of mortgage regulation as a real opportunity to help shape a future regulatory landscape that will serve both lenders and consumers better. We look forward to working constructively and collaboratively with the industry and the FSA towards this objective."
Stakeholder Response: Investment Management Association
Richard Saunders, chief executive of the IMA, told ePolitix.com: "The Turner review sets out a clear roadmap for future reform of the system. We need banks which are simpler, more transparent and once again capable of attracting private capital.
"The last 18 months have been devastating for the economy and for its financial infrastructure. It is encouraging to see the regulator addressing the issues with real intent and commitment to reform."
Stakeholder Response: Unite
Rob MacGregor, Unite national officer, said: "Another review with more rhetoric than substance will do nothing to reassure consumers or staff in the financial services industry. Action is well over-due by those who oversee the UK's financial services sector in order to overhaul the flawed sector and bring back trust.
"There is no question that the current regulatory framework is not fit for purpose, yet Lord Turner's latest report leaves unresolved key issues that the industry must address. The time is right for the government and Financial Services Authority to be brave enough to set out a new radical regulatory framework which moves away from a narrow national approach.
"Unite will shortly launch an independent report which outlines the urgent changes that are necessary to ensure that the financial turmoil which has gripped the world and brought insecurity to staff in the UK can not be allowed to happen again. It is vital that we now see regulatory reform which ensures the governance of financial markets is able to address the root causes of the crisis."
Dods Parliamentary Communications Ltd
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