Walker and Turner

The Walker Review of corporate governance and the Turner Review of banking regulation are currently taking place.    We have submitted our views to these reviews as a consolidated document.

The danger is that there is every prospect that the Walker Review will adopt a "do nothing approach" which is tantamount to a Canute like response to the rising tide of public anger on banks and which we do not think the politicians will wear in a deepening recession. Because there is every prospect of double dip recession looming, the political will will be there to bring in a "Sarbanes Oxley" type solution which will cause no end of problems and fail to achieve the desired objectives.   We have the first signs of this with the FSA's wish to bring in armies of new banking supervisors determined to get tough mainly as a public show to make up for their previous abject failure to supervise the banks properly.  They will have no more success than their predecessors because centralised supervisors are always looking in from the outside and subject to all the political agendas, bureaucracy and other concomitant deficiencies of a large organisations.

To avoid all that we have developed a radical solution which we are convinced will:

• have negligible cost either to the industry or the taxpayer
• prevent the worst case scenarios mentioned above
• greatly simplify the capital rules
• at the same time satisfy the public, and political requrements to fix a broken system
• leave current boards largely untouched
• protect executive remuneration from the likely "over the top" solution
• be welcomed by shareholders and result in a considerable strengthening of the value of the banking sector
• greatly improve strategic decision making and prevent the serious errors of the past of which none of the great banking institutions can be proud
• be a particularly British solution

If all of this sounds too good to be true be assured it is not. The essence is having publicly appointed boards of supervisors for large banks rather than centralised, FSA supervision, and having these banks audited by a beefed up National Audit Office. These boards would comprise well paid, professionally qualified, independent people with the resources to do the job properly, free from political interference and much preferable to the alternative.

The details are contained in the downloadable paper. Please contact us with any comments.