While there is some movement on the important issue of carrying enough capital for risky investments, overall the news is not good unless you work in the City or Wall Street. Their point about carrying more cash is valid though because if they are handing out fat bonuses, this could easily mean they are investing in risky ventures again which means they will now be forced to have more cash on hand to support those risks. Besides that, it's business-as-usual in the UK as well combined with a touch of unclear talk of the future.
Alistair Darling stepped back today from a radical overhaul of Britain's banks when he ruled out caps on bankers' pay or breaking up the biggest City institutions.
Pointing to the importance of 1m jobs in financial services and the £250bn of tax generated by the sector in the past nine years, the chancellor's much-anticipated response to the current "severe financial crisis" rejected demands for major reforms by opposition parties and the Bank of England governor Mervyn King.
But Darling told the Commons that "irresponsible pay practices made banks take too much risk" and that bank boardrooms "had little appreciation of what was going on inside their own businesses". Proposals for boardroom reform will be announced in an interim report by the City grandee Sir David Walker next week.
While Darling outlined steps to give the Financial Services Authority (FSA) new powers for financial stability, the current "tripartite" system involving the FSA, the Bank of England and the Treasury will remain largely intact after today's 176-page white paper on reforming financial markets. Banks will be have to hold more capital but it is not immediately clear how much, or what the impact of that will be.
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