I recently read a few articles regarding England’s new banking rules to be effective as of 2019. At the recent International Monetary Fund’s (IMF) annual meeting in Washington, Mark Carney, Bank of England governor, spoke about this radical reshaping.
The governor warns that in order to prevent future crisis, bankers’ behavior still needs to change following the financial crisis. He, like many others, agrees that the top executives “got away without sanction”.
“Maybe they were not at the best tables in society after that, but they’re still at the best golf courses. That has to change,” he said.
The governor’s warning comes amid a radical reshaping of the industry aimed at limiting the impact of any future bank collapses. By the start of 2019 banks will have to ensure retail customers’ deposits are protected and kept separate from their investment arms. UK financial institutions were told last week that they must submit their plans, detailing the legal and operating structure of their planned ring-fenced banks, by the end of the year. In response to senior bankers, Mr. Carney suggested if they are unhappy with the changes, then they should resign. However, new laws also mean that bankers found guilty of “reckless misconduct” could face jail.
“If you’re chair of an audit committee, you have responsibility for the activities of an institution. And if you don’t think you can discharge that responsibility, you shouldn’t be on that board,” said the Bank of England governor.
Mr. Carney’s warning followed a separate speech on plans to avoid any further taxpayer bailouts of big banks, which he said would reach a “watershed” at next month’s G20 summit in Australia’s Brisbane.
“The world’s largest banks threatened the stability of the global financial system. Their bailout using public funds undermines market discipline and goes to the heart of fairness in our societies. This cannot be allowed to continue,” he added.
In addition to this radical reshaping, the Bank of England’s Prudential Regulation Authority (PRA) is bringing in the changes to comply with a European directive. It is planning to create a “seamless” process of transferring accounts from a failed bank to a new account provider, so that even if a bank goes under, customers will be able to withdraw their money as usual within 24 hours. PRA chief executive Andrew Bailey said that the regulations would help to ensure “a stable financial system”.
The changes aim to prevent the chaos at the start of the financial crisis, when customers stood in line outside Northern Rock to withdraw their money, triggering the first run on a British bank in over a hundred years. Under the new proposals from the Bank of England savings of up to £1m are to be protected.
With all this talk of change in Europe’s banking policies, I wonder if the U.S. will follow suit with similar policies. Many are unhappy with the bailouts that occurred, and preventing this type of situation here would be welcome. What do you think?
If you would like to find related articles visit the two articles summarized in this blog at http://www.bbc.com/news/business-29514900 or http://www.bbc.com/news/business-29596866.
