Is the worm turning in Davos? As the World Economic Forum opened today, drawing together the ‘great and the good’ (ahem) of the financial world, bankers have been issuing dire warnings that a crackdown on the industry could hurt the recovery – and criticising the UK government for electioneering. Not quite what Gordon Brown wants to hear, particularly after Bank of England governor Mervyn King appeared to criticise his approach yesterday. If the PM thought yesterday’s positive GDP figure would buy him a day or two of positive headlines, he’s been very quickly disabused of that notion…
Here in the UK, King continues to be a thorn in the Prime Minister’s side. Merv told the Treasury Select Committee yesterday that he was a big fan of President Obama’s radical proposals for banking reform in the US – as opposed to the distinctly less radical ideas apparently favoured by the Treasury (like increasing capital requirements). And he openly scoffed at this ‘Tobin tax’ on financial transactions – an idea that Brown has publicly promoted – suggesting that it was ‘probably at the bottom of the list’ of ideas currently under consideration. Ouch.
And so to Davos, where the hot topic so far has obviously been what to do about the banks, particularly in light of President Obama’s intervention last week. Barclays’ (famously well-paid) Bob Diamond has been leading the fight-back: he told the assembled throng that he had ‘seen no evidence… that shrinking banks was the answer’, and argued that it could actually have a negative impact on jobs, growth, global trade, and the rainforests of the Amazon (ok, so we made up the last bit). He also suggested that the upcoming UK election was a major reason for all this tough talk – i.e. that the Government is just playing politics. Perish the thought.
You might argue that Diamond’s arguments are rather self-serving. But he may be right that international trade is more easily facilitated by international (and therefore big) banks. Another banker, Deutsche’s Josef Ackermann, also stressed the need for a level playing field across different jurisdictions, and this is definitely something to bear in mind – as Lloyds of London chairman Lord Levene pointed out, the US Sarbanes-Oxley rules just ended up driving business to the City. So a degree of international co-ordination is required, if only to make sure that the risk isn’t just transferred to shadier unregulated markets (Ackermann’s other big worry).
MT will be bringing you the latest from Davos all week, and you can expect to see a lot more along these lines. But the Government probably shouldn't worry: it’ll take more than a few speeches at a WEF conference to change the tide of public opinion.
In today's bulletin:
No relief for Brown as King weighs in and bankers hit back
Women and ethnic minorities lose out as inequality grows
Airlines lose $11bn in 'worst ever year'
A quarter of all training is pointless
Silver surfers shine as mentors online