Tagged with Financial regulation

The Banking Reform Act is rearranging the deck chairs on the neoliberal Titanic

deck-chairs-on-TitanicSome six years after the banking crash, the UK has wheeled out its answer – the Banking Reform Act. Some deckchairs have been rearranged, but little attention has been paid to the key drivers of the crisis.

The biggest financial crisis has coincided with the rise of neoliberalism, which emphasised faith in free markets and light-touch regulation. The notion of competition is a key concept and is applied to every sector of society, including corporations, regions, government departments, hospitals, and universities because this somehow secures efficient allocation of resources and opens the door to wealth and riches. Continue reading →

Watchdogs? More like dormice! Time to make them sackable

Regulating the regulators?Two contemporary cases highlight perfectly how accountability has become a byword for impunity. It is almost incredible that Paul Flowers, the disgraced former chairman of the Co-op Bank, was appointed after one 90-minute interview, even though he was a financial illiterate (he estimated the bank’s asset base at £3bn when actually it is £47bn) and had disclosed a criminal conviction. His appointment was waved through by a member of the FSA (Financial Services Authority) who did not bother to quiz Flowers’ 1981 criminal conviction for gross indecency on the grounds that it was irrelevant to the role of bank chairman! Continue reading →

Animal spirits in the stockmarkets don’t add up to economic recovery in the real world

GraphThere is an extraordinary combination at the start of 2014 of souped-up credit markets and an anaemic economy. The urge to talk up the economic recovery after so many false starts has turned the heads not only of investors but also of the economic commentators who show the same herd instinct of prophesying long-term continuing growth on the back of minuscule readjustment of the ONS figures.

By contrast the factual evidence of what is actually now happening in both the credit markets and in the real economy makes for far more sobering conclusions. The prolonged period of low interest rates has prompted investors to take on greater credit risks or use additional financial leverage in order to reach for higher yield. This has produced highly frothy markets which ominously resemble the pre-crash situation of 2007. Continue reading →