TIMES ONLINE: Mervyn King said yesterday that bankers should take a permanent pay cut to align them with other professionals as he outlined plans to carve up lenders across national boundaries.
Speaking to the Treasury Select Committee, the Governor of the Bank of England said the banking sector could be sustainable only if “returns and remuneration for both equity holders and employees are comparable with other professions and other types of investments”.
Mr King said that he thought it very unlikely that anyone would be able to “justify the extraordinary pay recently”, hinting at the row over the size of City banks’ bonus pools.
Mr King told the committee that he believed big lenders should be forced to carve themselves up into subsidiaries along national lines to try to build financial firewalls across the banking system and stop massive losses spreading. Foreign banking subsidiaries that run into trouble could be separated and contained — and become the problem of the overseas country in which they are based.
While Mr King said that the central bank was still considering whether to implement so-called Glass Steagall measures that force banks to separate their retail and riskier investment businesses from each other, he explained: “Banks who think they can do everything for everyone all over the world are a recipe for concentrating risk.”
He said that, ideally, the banking sector should be made up of more, smaller participants that specialised in different activities. >>> Suzy Jagger and Katherine Griffiths | Wednesday, January 27, 2010