Search

 

Cablegate: Ambassador's Introductory Call On Lord Turner,

VZCZCXRO2591
PP RUEHAG RUEHROV RUEHSL RUEHSR
DE RUEHLO #2208/01 2661511
ZNY CCCCC ZZH
P 231511Z SEP 09
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 3570
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 LONDON 002208

SIPDIS
NOFORN

NSC FOR HENNESSEY-NILAND
TREASURY FOR MURDEN, SOBEL

E.O. 12958: DECL: 09/22/2019
TAGS: ECON EINV UK
SUBJECT: AMBASSADOR'S INTRODUCTORY CALL ON LORD TURNER,
CHAIRMAN, FINANCIAL SERVICES AUTHORITY - BANKERS' BONUSES KEY TOPIC

Classified By: Ambassador Louis B. Susman for reasons 1.4 and d.

1. (C/NF) Summary. In Pittsburgh, the G-20 must commit to scrutinize and enforce bank pay and bonuses practices and such practices must include claw back and deferred payment provisions, Lord Turner, Chairman of the Financial Services Authority told the Ambassador on September 22. He said the French seem ready to withdraw their demand for bonus caps, which had threatened to derail consensus in Pittsburgh. Another point of disagreement, the issue of accounting standards, he predicted will not be resolved in Pittsburgh. In the 45-minute meeting with the Ambassador, Turner expressed concern that bankers had not learned a lesson from the crisis, and were returning to "business as usual." He stated that regulators had contributed to the crisis by focusing too much on procedures and buying into the belief that markets were perfect. End Summary.

2. (C/NF) Just days away from the Pittsburgh G-20 Summit, the French seem ready to back off their demand for specific caps on bonuses, Lord Turner told Ambassador Susman during their September 22 meeting. Having spoken at length to his French counterparts on September 21, Turner said the French will insist, however, that the G-20 issue clear guidance on pay practices - that such practices should include claw back provisions and deferred compensation, for example - and that the G-20 commit to strong enforcement of those practices. The UK, said Turner, also wants to see a G-20 commitment to strictly enforce such provisions, and he strongly encouraged the U.S. to agree to such enforcement.

3. (C/NF) Turner expressed concern about the record profits being made by several investment firms this quarter and how he expected that large bonuses will be paid out in the first quarter of 2010, which will once again draw public scrutiny and ire, and raise political pressure for more drastic measures to limit bonuses. Unless bankers' get the message that profits should not immediately go into their pockets in the form of bonuses, but rather be re-invested to restore the long-term health of financial institutions and the economy, there will be another round of public and political backlash. The public anger would be particularly acute since much of the recent profits are being generated as a result of managing large government bond issuances, of issuing debt at record low interest rates, and of enjoying less competition since many firms "exited" - voluntarily or involuntarily - the business. In other words, the banks are making money from the crisis, he commented. Turner predicted that whatever action is taken in Pittsburgh will temper the worst abuses for the next year or two, but unless there is a new regulatory framework or much better industry self-regulation, there would be a return to "business as normal." He cited one prominent CEO who had recently admitted that he leveraged so high to drive returns and seemed unabashed about this action. The Ambassador also expressed concern that the banking industry has not "gotten the message." Lord Turner predicted that if the banks do not change their behavior, political leaders would have no choice but to impose pay and bonus restrictions.

4. (C/NF) Turner stated that while he did not foresee any significant disagreements in Pittsburgh, he did not expect the Summit to resolve the question of accounting standards, and whether International Financial Reporting Standards (IFRS) should be adopted as the global rules of the game. He noted the political pressures that have been brought against both the U.S. Financial Accounting Standards Board and IFRS as a result of the controversy over fair value and mark to market accounting. He said many European regulators have criticized the U.S. for its insistence on retaining its fair value principle. He disagreed with the concept requiring companies to mark the value of their assets to whatever market prices they could find - even if those markets were illiquid or the assets were truly toxic.

5. (C/NF) In response to the Ambassador's question about why regulators did not identity or prevent the worst abuses of recent years, Turner noted that over the past two decades, the belief that markets were perfect became entrenched and self-fulfilling. Regulators lacked the confidence to challenge this belief, and the political support to take such a stand. There was too much lobbying and too close of a relationship between the financial institutions, the regulators, and the legislators. The challenge now, said, was to establish an experienced, savvy cadre of regulators and LONDON 00002208 002 OF 002 give them the political support to do their jobs. Visit London's Classified Website: XXXXXXXXXXXX
SUSMAN

© Scoop Media

 
 
 
World Headlines

 

Euro-Med Monitor: Updated Report On The Israeli Massacres During The Military Attack On The Gaza Strip

Geneva – The Israeli forces has killed and maimed many Palestinians in deliberate targeting of unprotected homes with families inside in inhumane military operations, Euro-Mediterranean Human Rights Monitor said. Since the beginning of the current ... More>>

IPPPR: The Independent Panel Calls For Urgent Reform Of Pandemic Prevention And Response Systems

Expert independent panel calls for urgent reform of pandemic prevention and response systems The Independent Panel for Pandemic Preparedness and Response is today calling on the global community to end the COVID-19 pandemic and adopt a series of bold and ... More>>

NGO Coalition On Human Rights: Call For A Stop To Police Brutality In Fiji

A viral video has circulated online showing two police officers utilising disproportionate and excessive force in detaining the suspect, an individual half their size. In the video it shows the man’s head being pressed down on the ground, his arms being ... More>>


Focus On: UN SDGs

ILO Voices: A Future With Hope, Free From Bonded Labour

By Padma Kumari Tamata Formerly in bonded labour, Padma Kumari Tamata is now a farmer, and grows and sells her own vegetables in the Kanchanpur district of Nepal. My name is Padma and I come from Vashi, a small hamlet in Nepal’s far-west Kanchanpur district. ... More>>

UN: Economic Recovery Under Threat Amid Surging COVID Cases And Lagging Vaccination In Poorer Countries

New York, 11 May — While the global growth outlook has improved, led by robust rebound in China and the United States, surging COVID-19 infections and inadequate vaccination progress in many countries threaten a broad-based recovery of the world ... More>>

Study: Cut Methane Emissions To Avert Global Temperature Rise

6 May 2021 Methane emissions caused by human activity can be reduced by up to 45 per cent this decade, thus helping to keep global temperature rise to 1.5 degrees Celsius in line with the Paris Agreement on climate change, according to a UN-backed ... More>>