Bank of England calls for culture change in banking

| March 26, 2012 | 0 Comments
Bank of England calls for culture change in banking

Michael Cohrs, a member of the Bank of England’s new financial policy committee (FPC) has warned of the danger of another financial crisis unless the ‘toxic culture’ inside banks is eradicated.

Changes should include a reform of banks’ bonus systems, he said.

The FPC was established to regulate UK banks, but Mr Cohrs suggested that it should have greater power to enforce decisions in the most complex cases.

He warned that the banking industry’s regulatory framework failed to prevent the financial crisis in 2008 and the Bank of England’s power to address any future concerns over systemic risk in the UK’s financial system needs to be strengthened.

Mr Cohrs admitted that it would be difficult to find the correct balance between public accountability and independence and that the changes would not be welcomed by the House of Commons.

“While it might seem easy to decide it’s time to take away the punch bowl, this is likely to mean curbing an electorally popular credit boom,” he said.

“The howls one will inevitably hear when doing it make it hard unless the FPC (and the Bank) have a strong degree of independence.”

“The good news is that I see evidence that banks are changing incentive systems and this will lead to a different culture within the banks which society will prefer,” he continued.

There is growing anger over the news that banks are trying to delay bonus payments in order to benefit from the lower 45p top rate of tax, which will take effect in April next year.

Meanwhile it was revealed today that the Financial Services Authority has fined Coutts Bank £8.75 million for failing to implement effective safeguards against money laundering and for failing to monitor the accounts of high-risk clients.

Coutts, which is part of the Royal Bank of Scotland Group, is best known as the banker for the Queen.

Tags: , , Coutts Bank, , money laundering

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