• Friday, December 01, 2023
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Riding the storm


Even the Vatican was stunned when Andrew Bailey, chief executive of Global Prudential Regulatory Authority, refused to back down or modify the statement attributed to him. Instead he declared on ‘Point Blank’ television programme: “As far as we are concerned, our priorities are, first of all, how do we make the whole system of banking safer and sounder? That includes even the Vatican Bank (known as The Institute for Works of Religion). We are the watchdog of the industry. We know banks have stopped lending more while they shore up their financial position. However, hoarding capital at the expense of customers is the wrong approach. We are responsible for global macro-prudential regulation which boils down basically to regulating the banks. Our position is that there are plenty of things banks, as lenders, can do to raise money. We are not afraid to let a bank go bust. Our focus is on safety and prudence. Making the system safer and sounder is not just about capital and liquidity. A big part of it is also we are not preventing all firms (banks) from failing.”

The irrepressible Bailey was unrepentant. On CNN, he stuck to his guns: “That brings us directly to the question of resolution and how we deal with failing firms, particularly banks. By the way, the same would be true of insurers, but let’s break some banks. Obviously, one of the very big and difficult lessons of the financial crisis is the too-big-to-fail, too-important-to-fail problems. And the fact that public money has to be used in that event to prevent the unacceptable consequences of failure.”

Q: “Do you believe there should never be too big to fail?”

Bailey’s Irish cream: “Yes, I do. I do believe that we can’t have institutions the failure of which it’s not possible to deal with without resorting to using the public’s money.”

Q: “Are you prepared to be bloody-minded about it?”

Bailey’s Irish cream: “We are very blunt. I make no secret of the fact that I prefer Irish cream to blood. However, our job is to give direct messages, not to dress them up.”

Bailey’s confrontational posture sent shockwaves all over the banking world. The response from the Vatican was pretty cool. The bankers need prayers. So also do the regulators, as auditors and lawyers.

When Pope Francis I waded into the matter, his address was directed at the chartered accountants who had been protesting in St Peter’s Square against the over-domination of the accounting business by the Big Four (largest accountancy firms): “Your profession is a sacred trust. It should reward you with public support, emotional fulfilment and reasonable material comfort. It should bring you together with trustworthy people, reliable professional colleagues and a shared commitment to honesty and integrity. It is imperative for chartered accountants to believe that they have a future not only in the pursuit of money and power but most importantly in the Lord’s vineyard. Small or big, the common denomination must be mutual respect.”

However, Bailey was not yet done. He popped up on Al Jazeera and went ahead full steam to declare: “We have been very clear, wearing our sort of new hat, which has in it a very strong emphasis on preserving not only the supply of critical financial services by banks, but one of which is lending. But there are a number of things that banks can do. One of which is raising equity. Another of which is reducing the size of balance sheets in other areas. There are other areas in terms of restricting balance sheets, selling off things that are no longer what I might call sort of care to the business. There’s a whole series of things that banks are doing. We as a regulatory body are seeking through the policy actions we are taking (and the banks are responding) to essentially clear up what I would call legacy issues. And we highlighted a number of these. It is a very sad fact that one of the things that have prevented the banking system from building capital at the rate that it would have expected to do so is that it is having, quite rightly, to pay out for misdeeds of the past. Those legacy issues have to be dealt with, and more capital is the most obvious means by which they have to be dealt with.”

We had barely swallowed Bailey’s Irish cream before Ben Wright, the feisty editor of Financial News, called the television station to challenge and confront Bailey: “There is still much to discuss: how banks on either side of the Atlantic have weathered the financial crisis, the health of capital markets in the US and Europe and the knock-on effects to the banking industry caused by various policy responses to the credit crunch. But really, the most striking thing is that we are, even now in 2013, still talking about US and European banks at all. Globalisation was supposed to have rendered such geographical distinctions moot long ago. The process of globalisation is arguably centuries old; the word has existed since the 1960s. But the financial markets only really started becoming more homogenised in the late 1980s and early 1990s when the process of deregulation – such as with “Big Bang” in the City of London – allowed international firms to start playing in each other’s backyard.”

The debate over what to do with the banks and bankers became fast and furious. Bailey had opened the floodgate! A caller from Nigeria, Brian Browne, was incandescent with rage: “Overconcentration of money and power in the hands of an increasingly smaller elite has doomed republics and kingdoms alike. When the rich and powerful are allowed to become too much themselves, they seize control of nearly all instruments of government, then impose laws that allow them to profiteer without risk at the expense of the many who are left without hope.”

It was at this point that the Dalai Lama who never uses the telephone or any modern gadget called for a truce. His advice was that it was time to give peace a chance by granting free pardon to all those who confess their sins. The Holy Father Pope Francis I was quick to declare his endorsement of redemption through confession and atonement. The bankers started trooping to the Vatican. 


Randle is a former president of the Institute of Chartered Accountants of Nigeria (ICAN) and former chairman of KPMG Nigeria and Africa Region. He is currently the chairman, JK Randle Professional Services.

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