The Turner Review: Industry Reaction

John Cridland, deputy director-general, The Confederation of British Industry (CBI)

“Adair Turner has come up with targeted proposals that deal with specific failings and risk to the system as a whole, rather than responding to the wilder calls for action against banks. His dispassionate, forensic approach has much to recommend it. A rush to legislation risked a repeat of a Sarbanes-Oxley type over-reaction, which would simply have compounded the effects of the recession.

“We are cautious about the review’s proposals on liquidity and product regulation. Rushing ahead with requirements for bank liquidity could put the UK out of step with other countries and force firms to manage their reserves on a country-by-country basis, which would be a blow to the UK’s competitiveness.”

Graham O’Connell, partner, PricewaterhouseCoopers LLP

“We are about to enter a period of intense regulatory change, both for the regulators themselves and the financial services community. Although general agreement exists that significant change in regulation is required, the proposed changes are likely to put more pressure on financial institutions at a time when they are already battling with issues such as lack of liquidity, unprecedented losses, difficult trading conditions and battered consumer and investor confidence. Many institutions will be forced to re-evaluate the viability of and evolve their business models to adjust to the proposed changes.

“The Turner Review highlights that in the future, the focus on international cross-border governance will increase, with a renewed focus on risk management, particularly stress testing of both liquidity reserves and of the adequacy of capital held by banks. This should mean that the role and prominence of the governance, risk and compliance functions within banks will become more important, and that the issues they seek to address will rise up higher up on the strategic corporate agenda.”

Angela Knight, chief executive, British Bankers’ Association (BBA)

“Financial regulation has to change here and around the world. The detailed discussions which will flow from this report are going to be vital as we need to ensure that the new framework is appropriate for small banks as well as the larger institutions and the UK retains it attractiveness for foreign banks.”

Laura Cox, partner, PricewaterhouseCoopers Legal LLP:

“While banks bear the brunt of the proposed changes, the Turner report also has implications for the wider financial services community. In particular, hedge funds appear to have temporarily escaped increased regulation in the UK, but report calls for integrated international regulation across the industry lines (banking, insurance and asset management) and contemplates introducing tighter regulation of offshore financial centres to bring them into line with evolving international standards.”

Andrew Baker, chief executive, Alternative Investment Management Association

“We are grateful to Lord Turner for his even-handed and measured approach and for not making hedge funds the scapegoat for this crisis.”

“We are glad that the review points out that hedge fund leverage ‘is typically well below that of banks – about two to three on average’ compared with levels of up to 50 times with some of the banks; and that ‘hedge funds in general are not today bank-like in their activities’. Given those qualifications, we do appreciate why in the interests of financial stability the review says that regulators need the power to apply appropriate prudential regulation to hedge funds if they judge that their activities have become bank-like in importance.”

PJ Di Giammarino, chief executive officer, JWG-IT

“By throwing the gauntlet down before traditional risk managers, the FSA has demanded that the banks rise to the challenge of proactively identifying and remediating risks. Banks need to wake up to the fact that these new regulations are upon them, and they’re coming fast.” JWG-IT recommends that banks make moves now to understand the new data models and infrastructures required to ‘know your bank’ in 2009.

Vince Cable, Liberal Democrat shadow chancellor

“If [Liberal Democrat] proposals on pay and bonuses had been followed five years ago, Britain would not be facing such a huge financial crisis now. However, this report completely fails to call for the separation of low-risk high street banking from high-risk banking. Banks should be safe places for people’s savings, not huge roulette wheels.

“Banks that act like gamblers in a casino, taking massive risks for big returns, cannot be allowed to come begging to the taxpayer when things go wrong in the future.”

Stuart Fraser, chairman of policy, City of London Corporation

“There is no doubt that some aspects of regulation and supervision have failed. The status quo is not acceptable and we do need change. But the City needs change which genuinely makes things better, not change for change’s sake. Mervyn King was spot-on when he called for ‘simple, robust’ regulation. Creating new rules for every eventuality will never work. Instead, regulation must be focused on outcomes and applied intelligently and effectively.

“The issue of remuneration in the financial services industry has become a political football, which is not helpful. Remuneration should be linked to long-term performance and profitability, taking account of risk management. Any proposals to regulate remuneration in the UK must be considered in the global context.”

Rob MacGregor, national officer, Unite

“Action is well overdue by those who oversee the UK’s financial services sector in order to overhaul the flawed sector and bring back trust. There is no question that the current regulatory framework is not fit for purpose, yet Lord Turner’s latest report leaves unresolved key issues that the industry must address. The time is right for the government and Financial Services Authority to be brave enough to set out a new radical regulatory framework which moves away from a narrow national approach.

“Unite will shortly launch an independent report which outlines the urgent changes that are necessary to ensure that the financial turmoil which has gripped the world and brought insecurity to staff in the UK cannot be allowed to happen again. It is vital that we now see regulatory reform which ensures the governance of financial markets is able to address the root causes of the crisis.”

To download the full 126-page pdf version of The Turner Review, follow the link below:
The Turner Review

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