Eric Daniels, the chief executive of Lloyds Banking Group, will retire next year. This is also the case with John Varley of Barclays and Stephen Green of HSBC. Sir Fred Goodwin stepped down from RBS in 2008 when the government were forced to save the bank from collapse. With the exception of Peter Sands, chief executive of Standard Chartered, this marks the final departure of bosses who steered the banks through the financial crisis.
Standard Chartered were shielded from the severity of the crisis due to its larger exposure to developing markets.
The coming months could also prove to a be a turning point for HSBC and with that, a blow to Britain. In March, their chief executive, Michael Geoghegan relcoated to Hong Kong. Now as Stephen Green steps down as chairman to take up a position as Trade Minister, their next chairman could be based in Hong Kong.
This is symptomatic of a greater trend of banks moving east to capitalise on the growth in China and the rest of Asia. HSBC, Barclays and Standard Chartered have warned that this move will be acclerated if regulations become too stringent.
They have a point. We run the risk of pushing these banks away, hence lowering our international competitiveness in the long term, if we continue on this path. At the Liberal Democrat conference today, Vince Cable will announce further plans to levy 50% on banker's bonuses again. We must be very careful - satisfy the need to protect our economy but not be too rash in doing so.
Tuesday 21 September 2010
Thursday 9 September 2010
To cut or not to cut...
The Lib-Con coalition have been very clear from the outset: the budget deficit will be reduced drastically by the end of this parliament. This is in contrast to Labour who planned to cut the deficit by half over the next four years. Between the two parties, there is a clear divergence on how to deal with our fiscal policy.
This conflict reverberates through the entire British economy. On the one hand, we have the ardent Keynesians, who argue that government spending must not yet be curbed. On the other hand, there are those like George Osbourne, who vehemently feel that reduction must be at a much faster rate. Perhaps this is true; sustained spending could trigger inflation in the long-run. Further, interest rates will rocket as investors lose confidence in our government.
However, I see more merit in keeping our foot on the pedal. There are pertinent lessons to be learnt from the demise of Japan. In the 1990s, they tightened their fiscal belt before private demand could sustain itself. This is the case with Britain. Household debt levels in the UK are worringly high - reduced public spending and tax increases do not bode well for the British economy.
Perhaps this issue is so capturing because of the conflict of ideas it presents. Both sides wield strong economical arguments.
Nevertheless, the budget deficit question is not as clear as it may seem. There is nobody who disagrees that the deficit must be cut. Our structural budget deficit is unforgivable and an EU commission estimates that our deficit lies at 12% of our GDP. It is the rate of cutting that is so hotly contested.
This conflict reverberates through the entire British economy. On the one hand, we have the ardent Keynesians, who argue that government spending must not yet be curbed. On the other hand, there are those like George Osbourne, who vehemently feel that reduction must be at a much faster rate. Perhaps this is true; sustained spending could trigger inflation in the long-run. Further, interest rates will rocket as investors lose confidence in our government.
However, I see more merit in keeping our foot on the pedal. There are pertinent lessons to be learnt from the demise of Japan. In the 1990s, they tightened their fiscal belt before private demand could sustain itself. This is the case with Britain. Household debt levels in the UK are worringly high - reduced public spending and tax increases do not bode well for the British economy.
Perhaps this issue is so capturing because of the conflict of ideas it presents. Both sides wield strong economical arguments.
Nevertheless, the budget deficit question is not as clear as it may seem. There is nobody who disagrees that the deficit must be cut. Our structural budget deficit is unforgivable and an EU commission estimates that our deficit lies at 12% of our GDP. It is the rate of cutting that is so hotly contested.
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