It’s a big statement from the man who effectively regulates Britain’s financial sector, and is supposed to be on the side of the banks: Lord Turner, the chairman of the Financial Services Authority (FSA) in the UK thinks banks are “socially useless” and wants to tax them to stop excessive bonuses.
It’s something which the G20 finance ministers were due to discuss at a big meeting next week, but Lord Turner is really ramping up the pressure early. He says the financial sector has “grown beyond a socially reasonable size.” And his solution:
“If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit.”
In other words – banks in their current form don’t serve society, and to try to change that, we need to curb bankers’ pay.
But is the role of banks to be socially useful? Despite the outrage over bankers’ pay, aren’t they already serving a purpose by their most simple function – allowing people to borrow and save?
Does the wealth generated by banks already justify their existence, despite their ‘flaws’? And a key issue – would banks be able to continue to generate that wealth if they are mandated to be more moral?
This British-based blogger is fuming: “Is Lord Turner trying to destroy the City?” he asks.
Nigeria is also in the middle of a banking crisis. Last week five bank chiefs were sacked by the Central Bank’s Governor for giving loans to prominent businessmen without following good risk management practices.
This Abuja-based columnist, whose life savings are in a bank that is now being bailed out, argues that the problems Nigerian banks are now facing are down to“basically issues of morality”.
Here’s another idea from MG Zimeta in Prospect magazine: in order to effect a “moral renewal” amongst bankers they should volunteer in the community instead of simply writing cheques for charity.
In Colombia a pyramid scheme called DMG is now a political party. It’s name no longer stands for the initials of its jailed founder, David Murcia Guzman, but for Dignity, Morality and Guarantees. Its presidential candidate, Jairo Calderon, says he’ll reform the Colombian banking system, if he gets a chance. It might need more than a name change to convince people of a moral approach!
Do we want our banks to be good or just good at making money?