Bankers bonus tax exodus is a price worth paying, says Bank of England
If bankers leave the country to avoid the bonus tax it's probably a price worth paying! That's the surprising view of Andy Haldane, the Bank of England's head of financial stability.
Speaking on the BBC World Service, Haldane said that banks had become too big and coud do with paring down. "Some of the downsides of carrying around a big financial system are now evident to all,” he said. "There is not so much as a scintilla of evidence of bigger being better in banking .... A lot of the noise around that really is rhetoric.
"So in most industries we do think that bigger and wider delivers a better product for the end user. I think in banking the evidence on that is close to non-existent. And we do know at the same time that bigger certainly isn't better when the going gets tough. Bigger during this crisis has meant bigger bailouts not better bailouts."
He said that if the price of reform was the departure of some bankers from the UK, then that would be worth it. "It's true that the lobbying effort of the financial sector should not be under-estimated. Equally, the way to beat that back is by appealing to logic and to evidence,” he said. "If some were to migrate overseas that would be unfortunate but given the costs of carrying that financial system around, it may be a price worth paying."
Haldane also warned of the dangers of a new culture in which banks were ready to take high risks confident that the taxpayer will bail them out if things go wrong, a scenario he called a “doom loop'. "It's a loop we've been round repeatedly over the last 200 years which is that every time we have one of these events, the public sector has ridden to the rescue, it has written the cheque,” he warned. “That has rather fortified the financial sector to double their bets for next time which means that when next time comes the cheque needs to be that much bigger ... It will be a long-run battle."
His comments came on the eve of publication of the Bank's twice-yearly Financial Stability Report said that the recent stabilisation of the banking system owed little to the skill of bankers and more to do with the reduction in competition.