segunda-feira, 8 de fevereiro de 2016
Now they want to kiss all the bankers
Now they want to kiss all the bankers
London leads way for a new political compact between regulators and financial industry.
By FRANCESCO GUERRERA 2/8/16, 5:30 AM CET
LONDON — A warm front is sweeping through the once-chilly relationship between banks and regulators.
After years of friction and recriminations following the financial crisis, when bankers were the favored bogeymen for policymakers on both sides of the Atlantic, executives and regulators are noting a shift in the political and regulatory climate.
“There is a noticeable change in behavior” in the past few months, said a senior executive at a large multinational bank. “On the regulators’ side there’s a real sense that they see banks as part of the solution and not as just being associated with the problem. And on our side, there is a willingness to get it right.”
This rapprochement is creating some apprehension. POLITICO spoke to nearly a dozen bankers and regulators who described a change in attitudes but declined to go on the record for fear of angering public opinion and politicians. “There mustn’t be any suggestions that regulators are going ‘soft’ on banks,” said one executive.
The question is whether this more relaxed mood heralds a new era in the relationship between watchdogs and financial groups — one that critics of the industry dread — or is just a temporary respite after an intense period of rule-making.
Many bankers are optimistic. “The rule of thumb with regulators now is that they do things to make the industry better and not things that are irrelevant to the industry but get them headlines in newspaper,” said a senior London-based banker.
Regulators privately agree, saying that they need strong banks to help jolt economic growth and restore the public’s faith in a sector that has been battered by bad news and even worse press for years.
“There’s a bit more flexibility on the part of regulators,” said Sam Tymms, a former U.K. regulator and now a managing director at Promontory Financial Group, a consultancy that advises banks and watchdogs. “What we are seeing is regulators saying: ‘If you get on and sort it out we won’t move as aggressively as we might otherwise have done’.”
‘Shoot first, ask questions later’
The current truce is a far cry from the cold war in the wake of the financial crisis. In the fraught months and years that followed the turmoil of 2008 , the two sides were barely on speaking terms.
Regulators and policymakers in both the U.S. and Europe responded to those cataclysmic events with a flurry of new rules and an onslaught of tough penalties against financial groups. Bankers felt victimized and ignored, incapable of getting their voices heard in the corridors of power in Brussels, London and Washington, and forced to pay huge fines for problems not entirely of their own making.
From higher capital buffers to restrictions on riskier trading activities and curbs on bonuses, financial groups had to contend with a comprehensive tightening of the rules of their game. To add to their woes, a new breed of aggressive enforcers came to the fore. For many bankers, the era was epitomized by Martin Wheatley, the post-crisis head of the U.K.’s Financial Conduct Authority, who famously summarized his credo as: “shoot first, ask questions later.”
George Osborne ushered in detente with the City of London in a speech at Mansion House last June.
In total, 20 of the world’s largest banks paid some $235 billion in fines in the seven years after the crisis, according to calculations by Reuters. The regulatory crackdown, roughly equivalent to the annual gross domestic product of Portugal, caused consternation among executives, hurt bank employees’ morale and prompted many to leave finance for good.
The state of play was summarized with characteristic frankness by Jamie Dimon in January 2015. Less than two years after J.P. Morgan had agreed to pay the U.S. government $13 billion in an historic settlement over mortgage-related issues, its chief executive declared that banks were “under assault.” “We have five or six regulators or people coming after us on every different issue,” Dimon told reporters. “It’s a hard thing to deal with.”
So what has changed? Bank executives and regulators point to three major factors for the more benign environment: fading memories of the crisis as time marches on; the natural end of a frenetic cycle of rule-writing and enforcement; and the realization that financial firms are a crucial part of the economic machine.
London is leading the way in this new compact with the financial industry. For many insiders, the turning point was June 10, 2015. On that day, in the austere surroundings of the Mansion House in the City of London, Chancellor of the Exchequer George Osborne announced a “new settlement” for the financial industry.
“Simply ratcheting up ever-larger fines that just penalize shareholders, erode capital reserves and diminish the lending potential of the economy is not, in the end, a long term answer,” he told an audience of banking and political grandees.
With those words, the British Conservative government was sending a clear message to one of the country’s key industries: No more fighting, we need you. Within a month, Wheatley, the activist regulator, was gone, leaving in his wake a trail of relieved bankers. In the words of one of them: “One of the regulators’ missions is to preserve trust in the financial system. If all they do is bash banks, it actually undermines the confidence in the system.”
At the end of last year, bankers got an unexpected Christmas present from U.K. regulators: The FCA ditched a long-awaited review of banking culture, which was likely to be critical of the industry. Then, last month, Andrew Bailey, a veteran Bank of England official who is widely respected in the City, took up the post of FCA head.
David Cameron’s Conservative government is now seeking the City’s help in the campaign to keep Britain in the European Union. Cameron and Osborne know that finance’s global nature makes it an important ally in the upcoming referendum against “Brexit”.
Brussels and Basel rules
Outside London the picture is less clear-cut. In Brussels, the European Commission is in listening mode. The Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) has just completed a “call for evidence,” asking financial companies what the cumulative impact of years of new rules will be on their business.
The industry’s frustration with the post-crisis onslaught of rules is apparent in their overwhelming response to the Commission’s request – more than 300 submissions amounting to thousands of pages. It will take months to compile and analyze the oceans of ink spilled by banks and their advisors. But for the optimists within the industry, this is a sign that Brussels is willing to take a long hard look at its rules and change what is confusing, counterproductive or harmful.
For others, this is merely a window-dressing exercise, one that will lead to even more paper-pushing but little action. The skeptics point to the next wave of regulations coming from the European Commission and other international bodies such as the Basel Committee on Banking Supervision. Indeed, a research paper by a consultancy doing the rounds in the Brussels community in recent weeks warns about “the return of banking” to the European Union legislative agenda in 2016.
“I really don’t see a wind of change sweeping through the financial regulatory landscape,” lamented a senior banker last week. In his view, the industry is still weighed down by scores of financial regulations and overseen by tough figures such as Daniel Tarullo, a member of the Federal Reserve’s board of governors, in the U.S. or Andrew Tyrie, the influential head of a committee of U.K. members of parliament.
Even if, to paraphrase Wheatley, regulators ask questions first these days, they are still expected to shoot afterwards, partly because public opinion and politicians demand it. “The public’s desire for retribution has not been sated,” said Jane Fuller, co-director of the Centre for the Study of Financial Innovation, a think-tank.
Asked about the public’s low opinion of his industry, the executive of a multinational bank agreed and sighed: “It will take time,” he said. “It will take a long time.”