How much bank regulation is too much?
TEXT OF STORY
Stacey Vanek-Smith: It’s a small world, and a pretty broke world, after all. The Group of Eight nations meets in Italy today to discuss the global recession. G8 countries including Russia, the U.K., Japan and the U.S. are hoping to coordinate economic recovery strategies. Apparently, everyone is struggling with the “How much stimulus is too much?” question.
Another universal quandry: How much regulation is too much? Today, the British government unveils its plans to regulate the U.K.’s financial industry. British bankers are bracing themselves for a crackdown on bonus pay and lending practices. From London, Stephen Beard has more.
Stephen Beard: The British government says that huge bank bonuses were a major factor in the credit crisis. They were often tied to the short-term performance of the bank’s share price. And that encouraged too much risky lending.
In the future, the government wants to see bonuses paid out over longer periods and linked to the long-term profitability of the banks. The government is also proposing new curbs on lending to prevent asset bubbles.
Lesley McLeod of the British Bankers Association says the government tred warily. Too many curbs might drive some banks out of Britain:
Lesley McLedo: It’s one of those cases where things just chase the money. So you could see, perhaps, a bank like Barclays or HSBC thinking about whether or not they want to remain quartered in the U.K.
But having spent more than $1.5 trillion of public money propping up the U.K. banking industry, the government feels the voters will accept nothing less than a crackdown.
In London, this is Stephen Beard for Marketplace.
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