UK: an interview with Paul Myners, Financial Services Minister

Today's Sunday Times newspaper contains an interview with Paul Myners, recently appointed to the Government as Financial Services Minister. Mr Myners observes that there is nothing fundamentally wrong with the tripartite system and, when asked if the Government would impose a limit on remuneration in the banking industry, replied:

The Financial Services Authority is producing a code on remuneration. The FSA has quite correctly concluded that the incentive effects of remuneration arrangements appear to have induced reckless behaviour, and so the FSA view is that if it is not happy with the way incentive effects work it will require a higher capital requirement for the institution, which you could see as requiring more insurance. If you are at the riskier end of banking you will need stronger capital ratios than if at the less risky end of banking.”

With regard to the Government's wider response, Mr. Myners observed:

I think regulation is one aspect of enhancing confidence in financial institutions. Others include self-healing through improved governance, more effective boards, more considered analysis of incentive plans and the behaviours they will produce, and stronger capital. There isn’t a single silver bullet here, regulation in itself without support of those other features will lead to a potential frustration of innovation and probably higher cost of funding.”