Financial services sector needs to be reined in
Government determined that there would be a maximum salary of €500,000 per annum salaries available to senior banking executives in the bailed out banks in Ireland. Government also decreed that bank CEOs should not be filled by an internal candidate.
When the latter was ignored by the bank, Government did absolutely nothing about it. When the former was ignored by the banks the Government did not even put in a token opposition at the bank AGM.
It simply abstained on the vote for the proposed salary increases and that’s the same as doing nothing. A ‘no’ vote might not have made a blind bit of difference to the end result, given the Government’s minority shareholding, but it would have signalled some semblance of our national displeasure.
The UK government on the other hand initiated attempts to block Ulster Bank and RBS bosses to once again start paying souped-up bonuses by putting a cap on such bonuses. Mind you its attempts to block excessive payments was unsuccessful as the bank bosses simply went around it by allocating shares worth millions of pounds to its top bankers.
At Barclay’s AGM, more than a third of shareholders voted against the proposed remuneration package for the top bosses. Unfortunately, the majority voted to permit Barclay’s to pay even higher bonuses to its bosses despite poor performance by the bank. As one shareholder put it “we are paying for Manchester United but we are getting a Colchester United performance”. How that comment resonates in Ireland.
The argument of Barclay’s chairman was that they had to pay this money as the bank was trying “to prevent an exodus of key staff from its investment bank”. Let them go and good riddance.
These people are not supermen. However, many of them are super risk takers. The unfortunate thing though is that the results of a bad risk do not seem to affect the take home of the risk taker. The taxpayer gets to pay time and again.
This has now taken a turn for the worse. Two senior executives of Anglo found guilty of breaking the law have been told that they will not have to do porridge because they were effectively led astray thinking that it was all ok because the State, through its regulatory mechanisms, knew all about it. Think of the field day smart lawyers will make of that one in future trials.
David McWilliams writing yesterday labelled it as Banana Republic stuff. It’s even worse. The regulators who fail to do their jobs and the politicians who permit it to happen will get away scot free. This is a great example of Irish style accountability and democracy.
In the Sunday Independent, Colm McCarthy said “bank managers still have little to stop them incurring risks at taxpayers’ expense”. The banking industry has long resisted reform and that includes reform of the accounting standards that allow banks to not show a loss until that loss has actually been realised even though the bank may be aware the money cannot and will not be repaid.
This allows the banks to hide the fact that potentially huge losses are coming down the line.
He also pointed out that despite what we might think the most heavily subsidised industry sector in Europe is not railways or farming, steel making or ship building, it’s the banks which receive a hidden subsidy of up to €200bn on an annual basis. Clearly these guys are far from supermen. They just have far thicker necks.
While we continue to pander to banks that are “too big to fail”, their bosses will continue to take us for a gallop. It is not beyond the EU’s capability to enforce an EU-wide policy banning unjustified rewards and unnecessary risks. Whatever — the financial services sector must be reined in.
