A couple weeks in, the FPC is ALREADY calling for "drastic reform"

Bank of England’s Andy Haldane calls 'em like he sees ‘em.

It seems a bit odd for one of the key figures in the UK’s newly installed financial regulatory structure to be calling for drastic reform of bank regulation already, but the Bank of England’s Andy Haldane seems to be calling them like he sees ‘em nonetheless.

Haldane is executive director of financial stability for the Bank’s Financial Policy Committee (FPC), the forward-looking systemic risk identifier created alongside the FCA and PRA as a result of 2012’s Financial Services act.

Given his position, it was interesting to hear him identify a “Byzantine” regulatory structure as a credible threat to the stability of the banking system, at a dinner held by the International Financial Law Review (IFLR) yesterday.

Complex regulation, he said, has only acted to the advantage of those with most resources to devote to exploiting gaps in the rules, arguing instead that “Simple measures of bank leverage, untainted by such complexity, were ten times better at predicting banking failure during the crisis than complex regulatory alternatives.”

Along with proposing a leverage ratio “north, possibly well north” of international requirements (a view that makes sense given Haldane’s work on the Basel committee), he suggested a “restructuring rule” facilitating simple wind-downs of banking operations, and a “resolution rule” governing restructuring, as the main building blocks of a stripped-down regulatory system.

Perhaps the most insightful back-to-basics comment made by Haldane this week, however, came at an event held the day before the IFLR dinner by the Federal Reserve Bank of Atlanta.

Speaking on the subject of executive bonuses, he built on comments made in January (regarding the proposed deferral of bonuses by ten years to encourage prudence) to suggest that debt, rather than equity, should make up the mainstay of management compensation structures.

“Equity can give strange incentives” to the management of banks in crisis, he argued, adding that during the financial crisis, “many big firms gambled for their resurrection when, if you look at how top management was remunerated, it was heavily in equity.”

Debt elements facing wipeout in the event of business failure, he explained, could act as a major counter to these “strange incentives” if built into pay structure, concluding that “more can and should be done to have those sorts of debt form a larger part of compensation structures.”

This approach – to look at the incentives that drive how banks behave, rather than creating a web of rules to restrict what is possible – feels very much in line with the current zeitgeist.

Steven D. Levitt, the economics world’s answer to Jeff Goldblum’s character in Jurassic Park, had this to say in the first chapter of bestselling pop-econ book Freakonomics:

“The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme. His solution may not always be pretty -- it may involve coercion or exorbitant penalties or the violation of civil liberties -- but the original problem, rest assured, will be fixed. An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation.”

With this in mind, it’s tempting to think that a creative look at executive remuneration, a subject which currently enrages a large slice of the world’s population, and which has been blamed for a lot of the misery to affect global markets since 2008, may be the tool capable of cutting the Gordian knot of post-crisis regulation.  

Photograph: Getty Images

By day, Fred Crawley is editor of Credit Today and Insolvency Today. By night, he reviews graphic novels for the New Statesman.

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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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