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Watchdog: No more 'soft touch' regulation
Joe Murphy, Political Editor17 Oct 2008
THE chief City watchdog today admitted that banks had been regulated "on the cheap" and said the era of "soft touch" oversight must end.
Lord Turner, the head of the Financial Services Authority, said the regulators had been "over-deferential" and would intervene more in future.
He served notice that there would be a more heavy-handed regime and that fees charged to the big financial institutions would rise so the FSA could hire a new generation of well-paid "poachers turned gamekeepers" to probe the books.
"There will be more people asking more questions, and getting more information than we were getting before," he said. "There is no doubt the touch will be heavier. We have to make sure it is intelligent and focused on where the risks really are."
He admitted that the FSA had been too nervous of being accused of undermining the Square Mile's competitive edge. "We are now in a different environment," he said. ''We shouldn't regulate for its own sake, but over-regulation and red tape has been used as a polemical bludgeon. We have probably been over-deferential to that rhetoric."
The comments of Lord Turner, a former CBI chief and Government pensions adviser, will be seen as an admission that the financial regulation system put together by Gordon Brown a decade ago has failed to do its job adequately.
In interviews with The Guardian and the Financial Times he suggested there had been inadequate investment. "Bluntly, we have been doing supervision on the cheap," he said. That would now have to change: "We'll have more people looking at the high-impact, systemically important firms with major knock-on effects than we did before.
"We will pay more than necessary to attract the correct quality of people from outside. Poachers turned gamekeepers are very attractive to hire."
Lord Turner said it was time to "wipe the slate clean" and debate reforms such as new rules and definitions of banks' minimum capital reserves as well as bonus structures and mark-to-market accounting. "One must avoid saying it must all be about bankers' bonuses," he cautioned.
Shadow chancellor George Osborne said Lord Turner's remarks were "a damning indictment" of the Government.
He said: "Lord Turner is absolutely right about wiping the slate clean. We have been calling for many of the changes he suggests, from new capital rules to reform of mark-to-market accounting and a better-funded regulator."
Reader views (4)
In America top Banking executives are being interviewed by the FBI for their role in the Banking scam. I'd like to hear that the SFO or th Police are doing the same oer here. Or do our chaps in the Banking Industry have friends high places to protect them?
- Arthur Atkins, Shepherds Bush England, 20/10/2008 11:04
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When will the bankers be given their opportunity to explain what happened? Will there be televised Parliamentary Committee hearings? Will there be a Royal Commission? When Lord Turner says "wipe the slate clean" is he preparing the ground for "forgive and forget?"
- Blackstone Coke, London, 20/10/2008 00:01
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It was only about two years ago that I read in this very newspaper that City financial firms were threatening to leave London for other parts of the world where they would be less heavily regulated! Where would that be I wonder? Beirut? Harare? Kathmandu? Baghdad?
- Simon Curtis, Lewisham, SE London, 17/10/2008 15:18
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Re-arrange the following into a well-known phrase or saying: Locking. The. Stable. Door. After. The. Horses. Bolted. Have.
- Nobby Clark, Perth, Scotland, 17/10/2008 13:58
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