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Two simple steps to transform the culture of banking and to forestall the next outrage


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It’s time to privatise commercial risk in banking and insist on prudent accounts. Government should: Eliminate moral hazard from the financial system by implementing this measure to make bank directors strictly liable without limit and to treat as capital both directors’ personal bonds and, for five years, the bonus pool. Introduce prudent bank accounting so banks can’t game the rules using derivatives to manufacture illusory profits from unrealised cash flows. The banking system isn’t capitalist It’s not capitalism when private individuals […]

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In the House today: Financial Services and Prudential Requirements


This afternoon an EU document relating to Financial Services and Prudential Requirements was placed before the House of Commons. It was not debated: debate took place in Committee last week. I attended, though I was not formally assigned to the Committee. The EU’s proposals amount to further European Union encroachment and unnecessary regulation: the document, rather than teaching granny to suck eggs, teaches bankers to make loans. It is fundamentally misguided. The EU’s preoccupation with attempting to regulate away 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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