British watchdog urges end to 'demonisation' of traders

22nd September 2010, Comments 0 comments

The head of Britain's financial watchdog has urged an end to the "demonisation of overpaid traders" for their role in the financial crisis, saying ill-designed policy should take much of the blame.

Adair Turner, head of the Financial Services Authority (FSA), said Tuesday that huge bonuses for bankers, exotic products and failures in risk management all contributed to the crisis.

But he said the real problem lay in an "entire philosophy of market regulation" which put too much trust in the system to keep itself in check and had been accepted by policymakers around the world.

The system "confidently relied on supposedly efficient and rational markets always to produce good results," Turner said in a speech in London.

"We do need appropriate regulation of bonuses to reduce incentives for excessive risk taking," he continued.

"But we also need to move beyond the demonisation of overpaid traders... to recognise that, in finance and economics, ill-designed policy is a more powerful force for harm than individual greed or error."

He also accepted the FSA had been guilty of failing to foresee the near collapse of the banking system.

Chancellor of the Exchequer George Osborne, who took office in May in Britain's new coalition government, has announced that the regulator is to be axed.

Turner hailed landmark changes to capital requirement rules for banks, called Basel III, which were unveiled earlier this month as "a major step forward."

"The Basel III reforms will significantly improve the resilience of our banking systems without harming economic recovery," he said.

The moves to make banks bolster their capital came in the wake of the global financial crisis in 2007-2008, which forced many governments in developed nations to rescue banks.

© 2010 AFP

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