What started out as talks to discuss bankers lending practices and bonus pay, quickly turned into the Vince Cable media circus. After all the dust cleared, sort of, George Osborne and others agreed to continue meetings on bankers pay and lending to businesses during the Christmas break.
Osborne and Cable met with bank bosses who had put together a plan to lend 200 billion pounds to businesses in the UK. The bankers present were John Varley, chief executive of Barclays, now exiting his post, and Douglas Flint, new chairman of HSBC.
To make certain small businesses benefitted from the funds made available, 70 billion pounds of it was earmarked for them.
Varley is the architect of the proposal, which in addition to the assurance of lending to UK businesses, includes a promise to apply restraints to bonuses. Although it has been promised, nothing concrete has been established.
As the bonus season begins, bankers find themselves once again under major scrutiny from the government. Returning to the pre–2008 crisis days of a more relaxed relationship with the government is a goal for the banking sector.
Other major banks of the UK represented at the conference included Lloyds, Santander and Royal Bank of Scotland.
The majority of ministers felt the meetings were productive, even though nothing clear-cut was decided on.
What did get accomplished was Vince cable becoming the center of a media firestorm. He raised several eyebrows when he made the comment: “I have declared war on Rupert Murdoch and his media empire.”
Cable approached the meeting eager to disclose more information on how the bankers are paid. He has been an active participant for years in scrutinizing the process of how the bankers derive their bonus plans. By making the process more public, he believes he can garner more support in placing limits on bankers bonus pay. He remains critical of the bank pay process.
The government commented on the subject matter which was discussed, saying: “Bank lending – particularly to small and medium-sized businesses – and pay discipline, and how the banking industry can best support economic growth and job creation in the UK in 2011 and beyond.”
“The banks have put a number of proposals on the table. The government affirmed its desire to see a strong, responsibly and internationally competitive financial sector. The dialogue was constructive.”
“These proposals will be the subject of further discussions over the Christmas period with the aim of building a sustainable, co-operative relationship between the lenders and government in 2011 in support of the economic recovery.”
One idea, although unpopular, Cable brought up during the meeting, was imposing a tax on banks when they refrain from lending enough to businesses. Osborne has since given the idea little support.
Osborne commented on the bank levy, saying: “What we’ve demonstrated in the last couple of weeks is we are prepared to increase the rate of the bank levy in order to sustain the revenue.”
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