LONDON (Reuters) - The Financial Services Authority’s job is not to downsize the financial sector or fuel “bash the banker” sentiment, a top industry representative said on Thursday.
Stuart Fraser, chairman of policy at the City of London, the municipal authority for the British capital’s financial district, was responding to FSA chairman Adair Turner’s support for “special taxes” on banks to rein in overly large bonuses.
“The point is, as Hector Sants, the chief executive of the FSA says, it’s not the FSA’s job to impose social taxes,” Fraser told Reuters.
Turner made his comments in Prospect magazine, saying that some parts of the financial sector were “socially useless” and that a global “Tobin tax” on transactions could help rein in big bonuses where higher capital charges failed.
The FSA has to be “very wary” of seeing the competitiveness of London as a major aim, Turner also said.
The City of London promotes Britain as a global money centre and Fraser was blunt in his comments.
“This is stemming from frustration that big bonuses have returned in some areas of the banking industry,” Fraser said.
“Certainly bonuses have returned, but it’s not from the risk taking we have seen in the past. This has been made from what we call vanilla products,” Fraser said.
“There is a good debate to be had, but we should try to avoid this populism and emotional response and bash the bankers,” Fraser added.
There was “very little chance” of a Tobin tax -- first mooted by economist James Tobin in the 1970s as a means of dampening speculation in currencies -- being imposed globally, Fraser said.
“We live in a very competitive environment. Other centres would dearly love to have business from London. If we want to shoot ourselves in the foot, they would be delighted to take the business,” Fraser said.
Under British financial services law, the FSA is legally bound to have regard to London’s international competitiveness when it comes to drafting new financial regulation.
Fraser said the City of London would be scrutinising the FSA’s actions to ensure this law was being adhered to.
“It would be a dereliction of duty if they did not,” Fraser said.
“It’s not their functional role to change the shape of the City of London internationally. This is why we have the Treasury and politicians,” Fraser said.
This week French President Nicolas Sarkozy called for a tax and cap on bank bonuses but only if all countries agreed, otherwise traders in France would move to London.
“Even the president of France is saying he is not prepared to impose some policies unless it is imposed by the G20 and there is a global agreement. I don’t really believe that many people would be prepared to see business drift away from London,” Fraser said.
Fraser said the City was aware of the need to go out and tell people why financial services are “socially useful.”
“We have to get on the front foot,” Fraser said.
Reporting by Huw Jones, editing by Jon Boyle
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