By Lea Pachta
Chancellor Alistair Darling’s tough warning to bankers against a return to the bad old days of hefty bonuses and excessive risk taking has once again thrown into the spotlight how the culture of the City has to change.
The Chancellor declared in an interview with The Independent: “There are people who are too complacent in my view. They need to be brought back to earth.”
While he said that ministers would not legislate to cap bonuses, a White Paper on banking to be published next week will increase the powers of the Bank of England and the Financial Services Authority to intervene and prevent excessive risk taking in the UK’s financial system.
Colin Melvin, chief executive of Hermes Equity Ownership Services, which represents shareholdings worth £50 billion, said: “There needs to be a paradigm shift in the way the City works. We need to usher in a new culture which rewards the creation of sustainable wealth and shuns short-termismin the relationship between shareholders and the companies they own.
“Further regulation is only part of the solution. The real answer lies with company boards and the end-owners of companies, pension funds and institutional investors taking their responsibility more seriously to prevent a repeat of the mistakes which led to the financial crisis of 2008.”