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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Are there “tens of thousands” who still don't have their Labour leadership ballot paper?

Word has it that swathes of eligible voters have yet to receive their ballot papers, suggesting there is still all to play for in the Labour leadership contest. But is it true?

Is there still all to play for in the Labour leadership contest?

Some party insiders believe there is, having heard whispers following the bank holiday weekend that “tens of thousands” of eligible voters have yet to receive their ballot papers.

The voting process closes next Thursday (10 September), and today (1 September) is the day the Labour party suggests you get in touch if you haven’t yet been given a chance to vote.

The impression here is that most people allowed to vote – members, registered supporters, and affiliated supporters – should have received their voting code over email, or their election pack in the post, by now, and that it begins to boil down to individual administrative problems if they’ve received neither by this point.

But many are still reporting that they haven’t yet been given a chance to vote. Even Shabana Mahmood MP, shadow chief secretary to the Treasury, still hasn’t received her voting pack, as she writes on the Staggers, warning us not to assume Jeremy Corbyn will win. What’s more, Mahmood and her team have heard anecdotally that there are still “tens of thousands” who have been approved to vote who have yet to receive their ballot papers.

It’s important to remember that Mahmood is an Yvette Cooper supporter, and is using this figure in her piece to argue that there is still all to play for in the leadership race. Also, “tens of thousands” is sufficiently vague; it doesn’t give away whether or not these mystery ballot-lacking voters would really make a difference in an election in which around half a million will be voting.

But there are others in the party who have heard similar figures.

“I know people who haven’t received [their voting details] either,” one Labour political adviser tells me. “That figure [tens of thousands] is probably accurate, but the party is being far from open with us.”

“That’s the number we’ve heard, as of Friday, the bank holiday, and today – apparently it is still that many,” says another.

A source at Labour HQ does not deny that such a high number of people are still unable to vote. They say it’s difficult to work out the exact figures of ballot papers that have yet to be sent out, but reveal that they are still likely to be, “going out in batches over the next two weeks”.

A Labour press office spokesperson confirms that papers are still being sent out, but does not give me a figure: “The process of sending out ballot papers is still under way, and people can vote online right up to the deadline on September 10th.”

The Electoral Reform Services is the independent body administrating the ballot for Labour. They are more sceptical about the “tens of thousands” figure. “Tens of thousands? Nah,” an official at the organisation tells me.

“The vast majority will have been sent an email allowing them to vote, or a pack in one or two days after that. The idea that as many as tens of thousands haven’t seems a little bit strange,” they add. “There were some last-minute membership applications, and there might be a few late postal votes, or a few individuals late to register. [But] everybody should have definitely been sent an email.”

Considering Labour’s own information to voters suggests today (1 September) is the day to begin worrying if you haven’t received your ballot yet, and the body in charge of sending out the ballots denies the figure, these “tens of thousands” are likely to be wishful thinking on the part of those in the party dreading a Corbyn victory.

Anoosh Chakelian is deputy web editor at the New Statesman.