Banks: Vince Cable’s proposal for shareholder control will not work, according to Professor Sikka

Professor Prem Sikka points out that shareholders are traders and speculators rather than owners: 

“They barely hold shares for more than three months and do not have a long-term interest in the business. They have been utterly ineffective at curbing corrupt practices at banks, as evidenced by the tide of scandals.” 

An appalling account of ‘serial offences’ in the banking sector follows. 

Professor Sikka continues: 

“If the government is serious about changing the predatory culture of banks then it needs to change the whole system of corporate governance. The market pressures for higher returns should be checked by turning all banks into mutuals and co-operatives. Employees, customers and borrowers have a long-term interest in the business of banks and should be empowered to elect and remunerate directors. Directors need to be made personally liable for the cost of criminal practices. At the moment banks are fined, but executives walk away with a stash of profit-related pay, with virtually no penalties. All major banking contracts should be publicly available so that we can all see the shady dealings. 

“The banking regulators have frequently come from the finance industry and are too close to banks. They act only after the stench of scandal has become too strong, and frequently they have been part of what a US senate report described as a “cover-up”. This inertia should be checked through annual hearings by the Treasury committee. 

“All policy meetings of the banking regulators should be held in the open, and information in the regulator’s possession – including background papers – should be made publicly available.” 

Could his beneficial proposals incorporate those of James Robertson? 

(1) transfer to nationalised central banks  the responsibility for creating, not just banknotes as now, but also the major part of the supply of public money consisting of bank-account money held and transmitted in electronic form . . . make an agency of the government responsible for directly creating and maintaining the public money supply in the public interest.

(2) prohibit anyone else from creating money out of thin air as profit-making, interest-bearing loans to their customers – leading to a more competitive market for facilitating loans between lenders and borrowers than today. That will bring commercial banks into line with ordinary businesses which don’t get given their main materials for free.

Websites:

Professor Prem Sikka: http://www.aabaglobal.org<http://www.aabaglobal.org/

James Robertson:  http://www.jamesrobertson.com

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Posted on July 4, 2012, in Banking and finance and tagged , , . Bookmark the permalink. Leave a comment.

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