Bad banking

Readers' Views No 295, Q2 2013
OECD Observer

The economic crisis has highlighted the lax economic regulations put in place in the banking sector, and your article reveals that deception and misconduct is still endorsed by some bankers ("Banking, ethics and good principles", OECD Observer No 294, Q1 2013).

Even more unsettling is how top bank executives and hedge-fund managers (the top 1% of the financial industry) still deal with their client companies' loans and investments. Since the deregulation of the financial sector was adopted, hedge-fund managers have been paid fees for managing their clients' money, and also a certain percentage of the ensuing profits. This has created greater incentives for hedge-fund managers to engage in extremely risky projects.

In light of the crisis and further scandals in the financial sector (including the manipulation of the LIBOR exchange) there is a collective consensus that reform in the current banking models is still needed. Too many agree that the current system of pay and bonuses are excessive, and badly attributed. Perhaps some of the top earners in the financial industry created products of high value, but there is still the justified belief that their salaries are inflated compared to their contributions to their company or the wider economy.

Capping bonuses to deter reckless bankers from taking risks detrimental to the taxpayer is the EU response, and this will come into effect in 2014. But will cities like London or Dublin, or indeed, Paris really play cricket and apply the caps? The OECD has long stressed that policymakers must regulate market failures. But as you point out, financial market companies still take up such a large chunk of the Dow Jones Industrial average. And as we know, it is no longer just that sector which is implicated. It involves the millions of financial users who rely on the health of banking; that is, society as a whole.

—Mikaela d’Angelo, London, UK


Comments and letters may be edited for publishing. Send your letters to observer@oecd.org or post your comments at these portals: www.oecdobserver.org, www.oecdinsights.org, or at the other OECD portals on this page. 

©OECD Observer No 295, Q2 2013




Economic data

GDP growth: +0.5% Q2 2019 year-on-year
Consumer price inflation: 1.6% September 2019 annual
Trade: -1.9% exp, -0.9% imp, Q2 2019
Unemployment: 5.2% September 2019
Last update: 18 November 2019

OECD Observer Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Subscribe now

<b>Subscribe now!</b>

Have the OECD Observer delivered
to your door



Edition Q2 2019

Previous editions

Don't miss

Most Popular Articles

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2019