Regulatory overkill in banking
Soberbia can best be translated as a mixture of arrogance and pride. It is one of the seven deadly sins and prevalent in Spain (and in half Spaniards like me). Yet in the World Cup final, the Spanish team won on the back of humility.
It is admittedly natural to be humble when failure stares you in the face every four years – a football-mad nation that consistently lost on the international scene, bar the 2008 European Championship – but it is rather more difficult for those who are champions in their fields.
Peter Sutherland has managed it. The former chairman of BP, founder of the World Trade Organisation and chairman of Goldman Sachs International, believes it is old friendships that keep our feet on the ground. He counts former UN Secretary General Kofi Annan as a friend, but his two best friends are from his early schooldays. One is a shopkeeper.
He said to me recently: “My interest is in sport and friendship and I judge people on who they really are, not on their success. I constantly question how I got to where I am. Genuinely, with humility, because I know the failings that I have…. which I’m not going to identify.”
One of his apparent failures (forgive me Peter) is a bulldozer-like quality. But ally that to a sense of humour and lashings of Irish charm and it is an irresistible combination that was instrumental in the birth of the WTO. As my BP shares continue to plummet, I rather wish he was still there as chairman, rather than Carl-Henri Svanberg.
Instead, former UK Prime Minister Tony Blair is being touted as the replacement. He ticks all the right boxes in terms of US politics: still respected and seen as a supportive friend of the US.
Sadly, his Teflon-like characteristic is one that bankers don’t have.
This column was originally about banking. But, rather like many of my banking friends, I am “desolate and sick”, as the Ernest Dowson poem has it. Sick of the endless waves of regulatory policies coming at the banks and bankers. Sick of cobbled together and contradictory legislation. Desolate at the nationalisation of credit and the undermining of globalisation.
None of the multitude of measures is going to stop the next banking crisis. But they are certainly harming the recovery. In the FT last month, Ed Clark, ceo of Toronto-Dominion Bank, the second largest in Canada, encapsulated what should have been done:
“What blew up was a relatively small number of institutions in Europe and the US that were clearly under-capitalised and clearly didn’t have enough liquidity. So why don’t you get them to have more capital and more liquidity and stop trying to change every rule in the rule book?”
Putting on my humble hat, which does slip off quite regularly, I would not write off all the initiatives. Or the excellent thought that has gone into transforming the regulatory landscape. Howard Davies, former chairman of the FSA and deputy governor of the Bank of England, co-authored a book that calls for, among other things, the end of the central bank and central bank governors as we know them.
“The past model – a secretive institution little inclined to explain itself and maintaining an air of mystery, cloaked in constructive ambiguity, and led by a philosopher king – has run its course… The new model central bank will be led by an individual who is skilled in chairmanship and communication and one who has a deep understanding of the financial sector and the wider economy, on a global scale. Taciturn autocrats need no longer apply (my italics).”
The book, Banking on the Future, also calls for the appointment of governors and other senior decision makers to meet best practice elsewhere in the public sector, with “advertisement and transparent processes.” A radical thought. I look forward to seeing an ad in the FT calling for someone with “a stubborn streak and a silver tongue” and, just as importantly, a thorough understanding of financial markets – something that was lacking in a number of central banks.
On a glorious summer evening at the Grange Opera in Hampshire, with white roses blooming on the walls of the Palladian mansion, there was another lesson in humility. Tosca gazed at the bloody cadaver of fearsome police chief Scarpia and uttered those immortal words: “And all Rome trembled before Him!”
Rather more prosaically, I tremble at the thought of peeling my son out of his Spain kit, which has been glued to his body for far too many hours.
Tags: BP, Howard Davies, Peter Sutherland, Spain, Tony Blair, Toronto-Dominion Bank