Stop demonising traders: FSA chief
Banking reforms need to move away from the "demonisation" of overpaid traders, the head of the City regulator has said.
Lord Turner, chairman of the Financial Services Authority (FSA), said rules instead need to address the fundamentals of what caused the financial crisis, although he stressed it is right to crackdown on "absurd" bonuses.
In his Mansion House speech, he said "ill-designed policy is a more powerful force for harm than individual greed and error".
However, he said recent Basel III banking rules to prevent a repeat of the financial crisis will be a major force for change, and defended the new requirements - unveiled earlier this month to boost capital reserves held by banks - against critics suggesting they do not go far enough.
Lord Turner said: "If we were philosopher kings designing a banking system entirely anew for a greenfield economy, should we have set still higher capital ratios than in the Basel III regime? Yes I believe we should.
"But starting from where we actually are, the Basel III reforms will significantly improve the resilience of our banking systems without harming economic recovery."
He added that the coalition Government's plans to scrap the current FSA model to create two bodies and hand bank supervision powers to the Bank of England will improve regulation. While not without its challenges, he said the move will create a "new structure which works well" and said he believes change is needed after regulators in the UK and worldwide failed to spot and prevent the causes of the banking meltdown.
Lord Turner stuck by his controversial comments made last year that risky financial products are "socially useless".
"There were some absurd bonuses for excessive risk taking: there was an explosion of exotic product development which last year I labelled as 'socially useless', a phrase from which I in no way draw back."
But he said "we need to move beyond the demonisation of overpaid traders" to ensure a similar banking crisis does not happen again.