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HSBC, Europe’s biggest bank, has called for changes to the ways that global institutions, banks and non-financial conglomerates, are regulated. HSBC also plan to create a forum of the world’s top companies to maintain a dialogue with policymakers as the new rules are drawn up.
Speaking at last week’s Davos Economic Forum, Stephen Green, the Chairman of HSBC, said that the current financial framework, though well-intentioned, had proven inadequate and should be fundamentally changed. London’s Daily Telegraph reported Green as saying that "Fair value accounting has added considerable volatility to results, only part of which is economic, and the capital adequacy regime has hobbled many banks with spiralling capital requirements just when customers need them to be flexible with lending."
Green also proposed setting up a forum of top internationally-active companies who would work alongside global policymakers to ensure that changes in regulation designed to tackle the problems of the past did not constrain the ability to escape the current economic crisis. This would be called “Business 20” to mirror the G20 group of major economies.
Green said that banks clearly had done things wrong in the past but that they must not be demonised. Salaries and bonus plans would have to change but that bonuses should not be eliminated. "We won't arrive at a situation where there are no bonuses," he said. "I think bonuses are a reasonable part of compensation as long as they are reasonable in their overall magnitude and, importantly, reasonably structured."
However in Washington, the attitude to bankers’ bonus schemes shows no sign of improving. President Obama has said that banks that have paid bonuses after receiving government injections have behaved shamefully and irresponsibly, and Senator Chris Dodd is calling for the US government to force these bonuses to be returned.
Many banks are taking heed of the current public reaction – Morgan Stanley and UBS are making bonuses subject to clawbacks, and Bank of America is reported as saying it will defer all bonuses over $50,000 for 3 years.
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