Interesting post today on banks, rules and principles by Robert Peston on his BBC blog, some extracts:
It is therefore odd that the future of banking is being decided as it has been done for more than 35 years, behind closed doors in the quaint Swiss town of Basel by a committee of unelected central bankers and regulators.
The consequences of carrying on like this will be profound.
Here’s the question: rather than a rulebook that’ll be even longer than the so-called comprehensive version of Basel ll – which runs to 347 opaque pages – wouldn’t it be far better to have some very simple easy-to-understand principles, that capture the spirit of the kind of risks that our society believes are appropriate for any institution that has been given the privilege of taking deposits.
Instead, regulators, central bankers and governments are patching up complexity. So, whether we like it or not, the rest of us will have to delegate even more responsibility in the coming years to the so-called experts at the FSA and in regulatory bodies around the world to prevent the system toppling over again.
He points out that agreeing principles would be hard (although not impossible) as the weaknesses of rules are often the very areas of high opportunity for banks. As the banks now seem to be doing quite well for themselves (although it is becoming increasingly dire for most others) there is going to be no stimulus for change from them and all the related and established institutions. An odd situation.
To really shake things up, it might be quite good to have some provocative entries from banks on WikiLeaks – at least a challenging conversation might result.
Comment: The Bank for International Settlements (BIS) is an international organisation which fosters international monetary and financial cooperation and serves as a bank for central banks (picture of part of HQ at Basel above). Established on 17 May 1930, the BIS is the world’s oldest international financial organisation.
Picture credit: here.