Chancellor promises tighter financial regulation as he says that bankers need to be "brought back to earth"

Alistair Darling has warned that even after the financial crisis, too many bankers remain “complacent” about excessive bonuses and risk-tasking.

The Chancellor indicated that next week’s banking reform White Paper will outline plans for tighter regulation of the financial system, as he promised that bankers who indulged in short-term speculation will “be brought back to earth”.

The document will argue the “tripartite” system of regulation, which divides responsibility between the Bank of England, the Financial Services Authority (FSA) and the Treasury, should remain. But it will also promise “new tools” for the Bank and the FSA to prevent a repeat of the credit crisis.

Speaking to the Independent, Darling said: “There are people who are too complacent in my view.

“Some (banks) are only operating at all because of very substantial support from taxpayers, who are entitled to tell the government we must not repeat the mistakes.

“If they go back to the way they were - to business as usual - without asking themselves over and over again whether they understand what they are doing, that would be disastrous for them and the rest of the world.”

However, he ruled out legislating to cap bonuses, as leaders including US President Barack Obama and France’s Nicolas Sarkozy have done.

Under the new proposals, banks will be required to hold a minimum amount of capital to ensure the mistakes of the past are not repeated.

He said all regulators would be prepared to “put people on the rack and ask some pretty tough questions”.

He denied reports of a power struggle between the Bank and the FSA over who will acquire new regulatory powers and insisted that both could work together to instill a new culture of accountability.

Post your comment

Please note: you will need to login or register before you can comment on the website