David Prosser: The banks are their own worst enemies
Friday 28 August 2009
Outlook They were queuing up to take pot shots at Lord Turner yesterday after the FSA boss dared to float the idea that a new tax on bank transactions might be the way to tackle excessive City bonuses. "Crackers" was the verdict of Mayor of London Boris Johnson, while even bank-bashing Liberal Democrat leader Nick Clegg wasn't too impressed.
The Treasury was too polite to say so in public, but privately officials were pointing out that Lord Turner's views are irrelevant, it being the Chancellor who decides tax policy. And with the Tories no more onside than Labour ministers, Lord Turner's contribution to this debate will remain a flight of fancy.
Still, Mr Johnson is off the mark in asking the Financial Services Authority to accept that the competitiveness of the City of London should be one of its main objectives. For one thing, Lord Turner was suggesting a global tax rather than a UK-only levy. More to the point, the FSA is not some sort of special interest group that exists to serve the financial services community.
In fact, if the FSA does its job properly, the City will benefit as a by-product – you might look on it as protecting the bankers from themselves.
The biggest threat to the competitiveness of London as a financial centre right now isn't the sort of tax that Lord Turner supports. It's the regulatory backlash from authorities in this country and elsewhere following the self-inflicted credit crisis. For years, France, Germany and countless other jurisdictions have been looking for an excuse to make a play for some of the business that flows through London. The chance to rewrite the regulatory rules in the wake of the crisis has presented them with the perfect opportunity.
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