Is more regulation
the solution?
Politicians across Europe and the US are
discussing introducing sweeping changes to
the way banks operate, including attemps
to limit bankers remuneration packages and
preparing regnlations to strengthen capital
requirements (Basel III). Many in the finan-
cial sector, however, fear that reforms could be
counterproductive and limit banks ability to
provide their customers with a complete range
of services.
In January, the then finance minister of the Netherlands,
Wouter Bos, announced a new remuneration plan for the
nationalised bank ABN AMRO. Bos said that ABN AMRO's remu
neration poiicy will be "in line with current thought on sustain-
able remuneration, and is a clear break with the past, while
still standing in proper relation to relevant job markets." The
changes introduced by Bos means remuneration at ABN AMRO
is more tightly linked to performance, and bonuses will only
be paid if managers perform above expectations.
Bos was also a firm supporter of the Banking Code introduced
by the Dutch Bankers' Association on 1 January 2010. Designed
primarily to engage banks to redesign their remuneration
poiicy and shore up corporate governance, the code also aims
to realign banks' responsibility towards their stakeholders,
such as their customers, shareholders and employees. Cover
ing governance, risk management, audit, and remuneration
within banks in the Netherlands, the code recommends that
supervisory board members have appropriate experience
within the financial sector, as well as thorough knowledge of
the interests of all parties involved in the bank.
Some politicians, meanwhile, are looking at the issue from
a different perspective. In 2008, President Nicolas Sarkozy
of France established the Commission on the Measurement of
Economie Performance and Social Progress. Chaired by Nobel
prize-winning economist Joseph Stiglitz, the commission was
established to look at the economy from a quality of life and
a sustainability angle, as well as the traditional growth model.
In a 2009 report, Mr Stiglitz and fellow Nobel prize-winning
economist Amartya Sen recommended that countries begin
assessing the economy using a model that factors in human
welfare issues, rather than simply economie growth, taking
into consideration the impact of issues such as unemployment
and environmental degradation.
In the United States, President Barack Obama has called for a
separation of investment and wholesale banking from retail
and commercial operations, in a bid to protect consumers from
the fall out of potentially risky banking practices. At the Euro-
pean level, meanwhile, the head of the European Central Bank,
Jean-Claude Trichet, has said that he believes any reforms
should ensure that the banking sector focuses on financing
the real economy, which he notes is its key role. Recent atten-
tion, however, has concentrated on the more pressing issue of
ensuring each of the European Unions' euro zone countries is
financially stable. What seems apparent, though, is that there
is still little consensus on how the new financial landscape
should eventually be shaped. There is no doubt, however, that
capital requirements will be further strengthened. Obviously,
Rabobank is already preparing for these developments.
ISSUE 23 MAY 2010 RI WORLD 17