Bin The Bashing. That was the central message of a 220-page report that thudded out from Washington’s Institution of International Finance on Wednesday.
For as British bankers reel from hefty new bonus taxes and Washington’s politicians debate a new round of regulatory controls, the IIF is frantically fighting back by wielding a list of bullet points that appear intended to overwhelm (or bore) its opponents into submission.
In exhaustive detail, Wednesday’s report described all the global banking sector had done “voluntarily” to clean up its act in the last year. While the details were complex, the moral was clear: if only national politicians would stop meddling so erratically, the financial sector would become healthy again – for the good of all concerned.
Will this political pleading work? I doubt it. If any non-banker has the appetite to wade through the IIF’s report – and its endless appendices – they will certainly find plenty of sensible ideas and encouraging news. The sections on risk management and liquidity systems, for example, include laudable and welcome details (albeit many which have arrived two years too late).
But the big political cloud, both in the UK and elsewhere, is pay. On Wednesday, Josef Ackermann, head of Deutsche Bank, appealed to bankers to show restraint in the current bonus round, noting that “it would be useful for all of us to recognise that the recent rise in profitability at many firms is attributable in part to exceptional support from governments and central banks”.
He probably means it. After all, Mr Ackermann has often remarked to friends in recent years that it is bizarre that his brother (a Swiss doctor) has been taking home so much less pay than bankers (such as Mr Ackermann himself).
But Mr Ackerman has also muttered for years that it would be corporate suicide for any bank to pay its top employees less than its competitors. Thus, not even the IIF seems to believe restraint alone can solve the issue: its report yesterday also called for globally co-ordinated guidelines to be issued in a level-headed, co-ordinated way.
Yet, in a piece of political theatre – or irony – that it would be hard to invent, that worthy plea came just as the British announced its unilateral bonus tax. And that is unlikely to be the end of the controversy.
After all, in the coming weeks, details of this year’s bonus round will inevitably leak. More news will come about future cuts to public finances too, echoing what Alistair Darling, the UK chancellor, told the British parliament on Wednesday.
And if that combination were not already bad enough, next spring the G20 will issue a scorecard on the progress that its members have – or have not – made in implementing joint commitments to curb pay.
Some bankers hope this G20 initiative will just be rhetorical mush, or something that groups such as the IIF will help to shape. Hence the IIF’s call on Wednesday for “co-ordinated” measures on pay – as opposed to the unilateral move that the British have unveiled.
However, the G20 pay report may yet turn out to be more forceful and controversial than it currently seems. After all, those running the project know the report will be the first test of whether the G20 can produce tangible, post-crisis reforms, and if nothing else, this will put the bonus issue back in the news.
So the IIF has its work cut out. Perhaps 2010 will turn out to be the year that politicians become so wildly unpopular that the public will finally be distracted enough to stop bashing the bankers. After all, it will be a year of budget cuts and elections.
But in a world where bankers continue to be convenient, distracting targets, politicians will undoubtedly keep trying to shift the focus; just as Mr Darling did, in fact, yesterday.
Meanwhile, I rather suspect that the worthy 220-page IIF report now looks destined to become a more effective paperweight than political weapon. Perhaps it is time for the IIF – or any financier wanting to make a point – to master the art of Twitter.
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