Posted by Jake on Saturday, March 29, 2014 with 3 comments | Labels: Article, banks, Big Society, energy, FCA, FSA, Graphs, insurance, OFGEM, regulation
“You can always rely on America to do the right
thing once it has exhausted all the alternatives”
Sadly, the same can’t be said of Britain.
London and New York have fought for the top “Global
Financial Centre” spot for years. According to the March 2014 “Global Financial Centres Index”
produced by Z/yen, who describe themselves as “the City of London’s leading
commercial thinktank”:
“New York is now the leading centre, although its
lead over London is statistically insignificant – two points on a scale of
1,000.”
What is it about crusty old London that keeps it head-to-head
with glitzy New York? According to a puff-piece by the City of London Corporation the key elements to a Global Financial Centre are:
- Critical Mass; Connectivity; People; Regulation; Domestic Market Infrastructure; Business Environment
Six solid gold attributes that New York and London can both
offer. But London offers something even more valuable! In March 2014 the Financial Times reported that the total
fines paid since the Banking Crash by banks to US regulators hit the US$100 billion mark:
"Wall Street banks and their foreign rivals have paid
out $100bn in US legal settlements since the financial crisis, according to
Financial Times research, with more than half of the penalties extracted in the
past year."
Figures show that in 2008 both UK and US regulators were fining banks a similar amount - reflecting the fact that the US regulation was then just as spineless as the UK. But by 2013 UK regulatory fines were only one
fiftieth US fines.
Exchange rate US$1.6 = £1 |
In America, having exhausted all the alternatives perhaps they are trying to do the right thing. The US Declaration of Independence states that power comes out of the consent of the governed: the font of power is the people. In contrast, somewhere deep in the British psyche seems to be the notion that power comes from above "by the grace of God". The notion that the powerful have a divine right to reap the people.
When they reap excessively UK regulators will only put up a gentle hand and softly "shush" them. We see this gentle approach in OFGEM launching yet another investigation into market abuse by the energy companies. And when the FCA announced a probe into £150 billion of suspicious business by insurance companies, the companies squealed so much that the FCA quickly issued a statement that they were certainly not going to be too strict nor too intrusive:
"We are not planning to individually review 30m
policies, nor do we intend to look at removing exit fees from those policies
providing they were compliant at the time. This is not a review of the
sales practices for these legacy customers and we are not looking at applying
current standards retrospectively – for example on exit charges."
FCA statement on fair treatment of long standing customers in life insurance
Should we pity the poor regulators, who actually know they are little more than fig-leaves? Hector "be very afraid" Sants, formerly chief executive of the FSA, said in a speech in June 2011:
"I would like to take the opportunity
to make some personal remarks on the challenges the FCA faces.
''The biggest disappointment of my time at the FSA has been the failure of firms, in particular their senior management, to learn the
lessons of past mis-selling. Sadly the recent history of the British retail
financial services industry is proof of the adage that those who fail to
understand the mistakes of the past are condemned to repeat them.''
Hector Sants, CEO of the FSA, 28th June 2011
Chairmen of the FSA lamenting the incorrigibly bad behaviour of the banks and insurers were joined in their frustration by the then Governor of the Bank of England, Mervyn King, who commented in March 2011
Interesting interview done by the Financial Times. US regulator comments on incompetent UK regulation of LIBOR by the British Bankers Association:
ReplyDeletehttp://video.ft.com/1722310076001/BBA-risk-to-public
In case you have forgotten about LIBOR, a summary from the BBC
Deletehttp://www.bbc.co.uk/news/business-18704603
Wonga, the payday loan company, was caught sending phoney 'solicitors' letters to customers who were behind in repayments, to scare them into paying up. The regulator declined to fine Wonga for this deception and said there would be no criminal investigation. According to a BBC report the FCA blubbered:
ReplyDelete"As this happened before the FCA took over the regulation of payday lenders, it is unable to fine Wonga. It also said there would be no criminal investigation as it wanted to set up a compensation scheme as quickly as possible and a criminal probe would take time."
http://www.bbc.co.uk/news/business-28015456