“Banking industry way overpaid and banking reform needs to address that” Thurso
May 27, 2011 6:02 PM
Local MP John Thurso on Tuesday called for any proposed banking reforms to take account of the fundamental problem that 'the whole industry is overpaid'.
The MP was speaking in his role as a member of the influential Treasury Select Committee as the cross-party group of MPs had the chance to question Sir John Vickers on his interim proposals on reform of the banking system. The interim proposals, amongst other points, propose ring-fencing UK retail banking from investment banking so that the UK retail banking side can be protected from the risks run by the part involved in more risky international investments. This would also mean the UK tax-payer would no longer be implicitly underwriting the parts of banks involved in international trading.
John Thurso argued that as well as addressing how much capital a bank should hold and either separating retail from investment banking or ring-fencing it, any proposals should also address the issue of bankers pay which contributed significantly to their willingness to take risks.
The Independent Commission will publish its final consultation on banking reforms this autumn.
Speaking on bankers pay John Thurso said:
"There is a real problem in remuneration, but is this not a much wider problem, why on earth should bankers be paid that much at all… look at FTSE hundred companies, in engineering and chemicals and all sorts of other things and remuneration as CEO and Chief Operating Officers are markedly less and they create wealth. The perception now is that bankers destroy it."
"Could we get to the fundamental point that actually the whole industry is way overpaid … rather than working out how to keep the size of remuneration but make it a bit more responsible?"
Martin Taylor (Member of the Commission and former head of Barclays Bank):
"The excesses that are understandably so deplored are actually quite recent in origin. The City has always been a highly paid place relative to everywhere else but I think things only really began to take off around the end of the nineteen nineties when Wall Street norms moved over here. We had a strange period because we had the dotcom boom which was obviously an incredibly prosperous time for the City and it was followed by this explosion of trading: the curious doctrine that half of revenues got paid out to traders which made people extremely anxious to find revenues which is partly where we have got to."
You can watch the full session of the Treasury Select Committee at: Treasury Select Committee: 24th May 2011. John's turns came at at 10:31.49, 12:40.15.
The Members of the Commission being Question were Sir John Vickers, the Chair, Martin Taylor, a former head of Barclays Bank and Bill Winters a former co-head of investment at JP Morgan.
For a useful executive summary of the Independent Commission's Interim Report you can go to: http://bankingcommission.independent.gov.uk/
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