King calls for strict stance on regulation
BANK of England governor Mervyn King said yesterday that tougher measures on banking regulation were still needed, and added that some bonuses being paid to executives were “absolutely astronomic” and could not be justified.
“Executives at the top are earning vast sums, beyond the dreams of ordinary people, for doing a job which it’s very hard to say justifies that kind of bonus,” King said.
He added that companies should not get sucked into an attitude of “the other banks are doing it, we must take part too”.
The news came as the insurance body ABI slammed treasury minister Lord Myners’ radical shake-up plans for financial regulation.
His plans for a two-tier shareholder register with separate rights for long and short-term investors are “dangerous,” the group said, and may lead to a loss of confidence in the markets.
The ABI said the plans could leave companies with one group of supportive shareholders, and one group losing out as it is unable to trade freely.
“If you discriminate between the kinds of shareholders you have got, that is not good for confidence in the market,” warned Peter Montagnon, director of investment affairs at the ABI.
“We need to do more to build up a critical mass of good long-term shareholders who are going to work together to solve this problem,” he added.
Myners’ suggestion to overhaul regulation is based on the idea that institutional shareholders take more responsibility for the ownership of their stakes.
He has said that companies without responsible shareholders are “ownerless corporations,” and says they are at the heart of the financial downturn.