Lord Turner of Makebelieve is at it again. In contrast to the sensible proposals for Basel III from the Americans (higher capital requirement for riskier businesses and real world bonuses), Lord Turner wants banks to make “living wills” which would cost them serious money in the short term and have no benefit in the long term. Turner wants them to volunteer to pay more tax. Whatever banks may say now, the “living wills” would only come into effect after they were dead which tends to limit decision making capacity and those coping with the then situation would not be bound by the wishes of a board stupid enough to bankrupt the business. More likely the then government would have rescued any major bank from death anyway.
Unsurprisingly, the banking industry and their advisors are refusing to swallow Turner’s medicine.
Lord Turner is, once again, leading the way to the asylum and no one else will follow. He is simply delaying progress on Basel III, something that his boss, our PM, is already grumping about.
The American proposals for variable levels of capital requirements would be simplified by breaking up our largest banks, something we should do anyway to let competition back into the system. That would also achieve Turner’s objective for simpler legal structures in a sane and practical manner.