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Of course shareholders should control executive pay

Via the BBC: Swiss voters have overwhelmingly backed proposals to impose some of the world’s strictest controls on executive pay, final referendum results show. The measure has two important strands: shareholders will have a veto on executive remuneration and golden hellos and goodbyes will be banned. The former is a sensible, pro-market reform, the latter is not. Both are a response to what has gone wrong with capitalism. It is entirely right that the owners of firms should control the […]

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Speech on the Financial Institutions (Reform) Bill

I was delighted today that my ten-minute rule Bill was introduced without opposition. This late in the Parliament, the Bill itself is extremely unlikely to make further progress but I was glad to put the following on the record (these are my notes – Hansard is here: Mr Speaker, I beg to move that leave be given to bring in a Bill to enforce strict liability on directors of financial institutions; to require directors of financial institutions to post personal […]

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Financial Institutions (Reform) Bill – Other measures

In previous articles, I set out why it’s necessary to address risk-taking incentives in banks and how losses would be covered from the bonus pool and director’s personal bonds before hitting equity. This article sets out other necessary provisions. 5. Accounting standards 5.1 For the purposes of the Bill, all relevant figures (measures of profit, loss, capital, bonuses, personal bonds posted, etc.) would be obtained using parallel prudent accounting rules i.e. UK GAAP under Companies Act legislation. This was proposed in […]

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Financial Institutions (Reform) Bill – Use of personal bonds and bonus pool to make good bank losses

Yesterday, I began to set out how my proposed Financial Institutions (Reform) Bill would meet the need for a vibrant, reliable and robust banking system by adjusting bank directors’ and employees’ exposure to commercial risk. That article described changes to bank directors’ liability and the treatment of bonuses. This article explains how losses would be made good and defines core capital. 3. Use of personal bonds and bonus pool to make good bank losses 3.1 Should a bank report losses […]

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Financial Institutions (Reform) Bill – Liability of bankers and treatment of bonuses

A developed society like ours needs a good means of exchange, unit of account and store of value: a good money. It also needs a vibrant, dynamic, reliable and robust means of executing payments and intermediating savings to entrepreneurs: we need a good banking system. Unfortunately, Of all the many ways of organising banking, the worst is the one we have today. And I agree with the Governor of the Bank of England. He said elsewhere in that speech, “At the […]

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The BoE’s Andrew Haldane: “The best proposals for [bank] reform are those which aim to reshape risk-taking incentives on a durable basis”

While preparing to seek permission to introduce my Financial Institutions (Reform) Bill, I discovered a recent article by the Bank of England’s Executive Director for Financial Stability, Andrew Haldane, The Doom Loop: Equity in Banking: The continuing backlash against banking, as evidenced in popular protests on Wall Street and in the City of London, is a response not just to the fact that the world is poorer, as pre-crisis riches have turned to rags, but to the way these riches were privatised, […]

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The European Union’s failure by its own standards

The 2011 Legatum Prosperity Index includes a number of insights. The fourth article is “The European Crisis: Time to Rethink Integration?” In a sidebar, the author explains that the average confidence in a European Government is 12% lower than the Index average. Legatum suggests that European electorates feel increasingly excluded as national parliaments have ceded more power to the Union, opening up a gap between the process of European integration and public opinion. Indeed. The main article begins: The Prosperity […]

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