18 | capitaregistrars.com
THE INTERVIEW
LORD MAYOR OF LONDON
» Our FSA has put their hands up and said in certain
areas regulation has failed. Who’s to say regulation isn’t going to fail again? What we need is better regulation that is proportionate and not a ‘one-size- fits-all’ solution.
The industry needs to engage with the regulators so that they get an outcome that will be acceptable to both parties. You can sit professionals down and get to a solution but, of course, there is a political dimension. Some people would have us put all our money into a national savings bank but that’s not going to do anything for economic growth, cost of capital or liquidity to enable more people to borrow.
I see working with the regulators as part of the risk management procedures of a bank. They are part of the checks and balances that you should embrace. And I think that is exactly where we are – I would say that the banks in London are in better shape than they have been for years. That’s because management have responded and taken a lot of the actions themselves. They have unilaterally recapitalised their balance sheets – partly due to the stress testing of the FSA but also due to the fact that they recognised that there was a need to do so.
The FSA has also smartened up its act – that is clear from the conversations I’ve had with its leaders. You can hear that when you talk to the international banking fraternity as well. They are finding it invasive to a certain extent but that’s part and parcel of a better approach. And everyone’s still finding their way out of a crisis so we’re still operating in that knee-jerk environment, but hopefully things will settle down soon.
How is our relationship with the EU going to impact on the City – especially with so much financial policy now in the hands of the French?
You need to bear in mind that you are in a global
industry, with global talent that is capable of moving at will to different jurisdictions – and they’re in it for the money
I’ve been saying since I became Lord Mayor that we need to have a dialogue with Europe and I have been encouraging companies to develop a relationship with the EU at the highest level. It is vital that we spend time with Europe and influence the decision makers – not just in the Commission but also in the Parliament. And we need to ensure that we have our national government informed about what is going on in Europe so that it can go into battle on our behalf through the Council of Ministers when appropriate.
Even the commissioner who is responsible for the relevant portfolio is very positive about London. Michel Barnier is in the key post now [Commissioner for Internal Market and Services] and he himself has said that London is the financial capital of Europe. Writing to MEP Syed Kamall, he said: “I fully understand [London’s] importance, and I want it to be an even more vibrant powerhouse creating jobs and growth for all.” We have got to embrace that and have a dialogue with him. We want to be right at the table when ideas are being hatched by the Commission.
SPRING 2010
Will there ever be a central European regulator?
At the end of the day that is going to be a decision for the European member states. But I think once we get an agreed set of level-playing-field regulatory reforms then there is no harm in having a body overseeing European regulation to make sure it is being applied properly across the board. But you should never give up national sovereignty in regulation.
We also need to work with New York – therefore we need to have our European commissioner talking with the regulators in the States. What we don’t need to do is create divisions and gulfs between us. The good news is that in many ways we are leading the European debate through Adair Turner’s role on the Financial Stability Board.
Will dematerialisation of shareholdings ever happen?
Technology will take over wherever it can, wherever it is appropriate. But until it is possible for the technology to meet the obligations of the Companies Act – and until it is accepted by practitioners – it perhaps won’t move forward at the pace some would like to see. But now that you’ve got changes in legislation about access to financial information, you can see that perhaps it will happen. There have been lots of things that have happened over the last 10 years that people would not have predicted.
How do you expect shareholders to react to the continued existence of a bonus culture within the City – especially in banks that are now effectively under government control?
Shareholders will have their own individual views. Of course, the trade bodies are making strong representations about how shareholders should behave and encouraging the proper application of corporate governance procedures, which is to be applauded.
But what do you mean by shareholders? Do you mean domestic fund managers or insurance companies and their shareholdings in this country, influencing the FTSE100? They should do – and they have always been active and interested – but the ability for them to influence the decisions of boards is somewhat limited. Because of London’s position as a global financial centre only a minority of shares in FTSE100 companies are owned by British institutions – so where is their power to influence the debate?
I think you will find individual shareholders may well take a stance from time to time. In relation to the issue of bonuses, that is something for the boards to decide upon and if the shareholders don’t like it they can
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