Davos Summit 2010: Banks must get real on profits, says WEF report

Annual meeting to focus on 'rebuilding the global financial architecture'

Gathering in a more sober mood than was often the case during the boom years, organisers of the World Economic Forum in the Swiss town of Davos will attempt to focus the attention of the 2,500 or so leading bankers, business people and economists here on the slogan for this year's gathering, the 40th since 1971: "Rethink, redesign, rebuild the global financial architecture" – or, in layman's terms, "fixing the banks".

The urgency and importance of the task was highlighted in a special report published on the eve of the conference. In it the WEF, in collaboration with the management consultancy Oliver Wyman, warned that the banking industry will have to adjust to lower levels of profitability than prevailed before the credit crunch. The report's authors also cautioned that the financial community needs to become more "realistic" about remuneration in the years ahead, reflecting widespread public and political disquiet about lavish bonuses.

The report said: "A multitude of factors point to lower run-rate industry profitability in the near and medium term. Financial institutions will need to rethink their business and human capital models in order to adjust and differentiate as a result... they will need to promote and enforce positive values such as integrity and responsibility."

A further working paper from the WEF asks governments to exercise commercial rather than political judgements when they come to sell off their substantial equity stakes in formerly private banks acquired during the financial crisis. "Taxpayers will benefit most if governments put shareholder responsibility ahead of political considerations when it comes to managing their equity stakes in financial institutions," it said.

Across the world, more than $700bn (£434bn) of taxpayers' money has been invested in financial institutions, including The Royal Bank of Scotland and Lloyds Banking Group in the UK, Hypo Real Estate in Germany and AIG, Freddie Mac and others in the US. The WEF added that "the wrong choices – in policy objectives, management strategy, or emphasis in execution – could cost taxpayers billions of dollars and have long-term implications for the stability of the global financial architecture."

Still more controversially, the report's authors say that state-owned institutions have little spur to competitiveness, distort the market for banking services and exacerbate the "too big to fail" problem by being so obviously backed by taxpayer guarantees. Despite calls from many politicians and small business organisations for state-owned banks to be made to expand their loan books, the report states that ministerial interventions should be limited to the board membership and other governance matters.

Further attention today will centre on contributions from Bob Diamond, the president of Barclays, and Lord Turner, the chairman of the Financial Services Authority, during sessions on preventing new financial crises and asset bubbles.

However, for most of the attendees in Davos, the appearance of the former US president Bill Clinton, the UN Special Envoy to Haiti, will be one of the highlights of this year's event, albeit in sombre circumstances. Mr Clinton will launch an appeal to some of the planet's richest individuals and most powerful corporations to contribute more to the rebuilding of what was already an impoverished nation before the devastating earthquake earlier this month.

*The police commander in charge of security at the World Economic Forum in Switzerland was found dead yesterday, local authorities said, adding that his death appeared to be suicide.

Markus Reinhardt, the head of police in the Swiss canton of Graubunden, was found dead in his hotel in Davos, police said in a statement. "All indications point to a suicide," the statement said.

Mr Reinhardt, 61, had headed the canton's police force since 1984. Police captain Marcus Suter will take over the security operation of the five-day assembly.

Start your day with The Independent, sign up for daily news emails
Property
pets
Arts and Entertainment
tvGame of Thrones season 5 ep 4, review - WARNING: contains major spoiliers!
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Sport
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
News
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Sport
football
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
News
news
News
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
news
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living