ONE of the UK's largest banks should be recapitalised and broken
up into smaller, regional outfits, the Archbishop of Canterbury
(above) said on Monday.
Archbishop Welby spoke at an event in Westminster on Monday
evening, organised by the Bible Society, on the question: "How do
we fix this mess? Long-term solutions to the financial crisis."
He said that banks that were distanced from local communities
did not have a "broad sense of promoting the well-being of a region
of which one is an integral part". He had concluded that "at least
part of the banking system should be local, not London-based, and
have its root in its own community. . .
"In simple terms, we need to recreate the local, and the easiest
way to do that . . . is to kill two birds with one stone by
recapitalising at least one of our major banks and breaking it up
into regional banks."
Archbishop Welby said that the "symptoms" of failures in the
financial markets had been "those of a failure of confidence. . .
Historically, the great failures in banking have led to very, very
long periods of recession at best, and I would argue that what
we're in at the moment is not a recession but essentially some kind
of depression. And it therefore takes something very, very major to
get us out of it in the same way as it took something very major to
get us into it."
To restore confidence in banking, it was important that
attention was paid to "professional standards," Archbishop Welby
said. "We cannot go on with banking being essentially something
that people drift into in the way that I drifted into being a group
Archbishop Welby also called for a "revolution in the aims of
the banks". They should not exist to "maximise the returns only for
their shareholders. . . They exist for the benefit of the whole of
Archbishop Welby also spoke of the need for a culture of virtue
in banks. "Good culture requires a ruthless honesty and a deep
willingness to be made very uncomfortable indeed through listening
to things that one does not want to hear. The creation of virtue is
community-based; we correct each other. But good culture and
virtuous cultures only develop in communities of trust."
A Downing Street spokesman said on Tuesday that the Prime
Minister and the Chancellor "agreed with the Archbishop's analysis
that we have a slow and difficult recovery because of the problems
in the banking system", but stopped short of describing the
situation as a "depression".
BONUSES awarded to executive directors that exceed 100 per cent
of their basic salary, should be challenged by the national
investing bodies of the Church of England, a new policy published
by the Church's Ethical Advisory Group (EIAG), states.
The policy on executive renumeration has been adopted by the
investing bodies, which will use it to determine their voting on
the renumeration reports of the companies in which they hold
James Featherby, who chairs the EIAG, said on Friday: "Executive
directors perform difficult and important roles that require high
levels of skill, enterprise and innovation. All staff should be
rewarded fairly and executive director roles understandably command
good salaries . . . We want to see lower annual bonuses and greater
emphasis on rewarding executives who manage ethical, social and
environmental issues well and so deliver enduring corporate success
over periods of five to seven years."
In creating the guidance, the EIAG drew on theological and
biblical studies, and a range of views held in the Church of
England today. It notes that: "When material rewards become vastly
unequal, it becomes harder for people to perceive the truth of
equality before God".
However, it suggests that, in drawing up a Christian ethical
policy, there is a need to balance idealism and realism, justice
and self-interest: "Of course, Christians will hope that people of
ability will take on responsibilities and burdens gladly and
sacrificially on behalf of the common good. Yet this ideal is
tempered by the awareness that human frailty puts the perfect
realisation of Kingdom values beyond our reach and some concessions
from the ideal must be made if the fallen world is to embody the
godly virtues of peace, justice, sustainability and creativity as
well as the ideal of equality."
Differentials in renumeration can be justified "by some
reasonable calculus linking higher rewards to greater contribution,
skills and responsibility". Those who are lower paid must also be
Analysis cited in the guidance suggests that executive
renumeration has become "misaligned with revenues, profits and
shareholder returns". Between 2001 and 2011, the median annual
bonus potential for a chief executive of a FTSE 100 company
increased from 60 per cent of basic salary to 150 per cent. It is
rare for a chief executive not to receive a bonus, the report
Church investing bodies are advised to "use discretion" when
implementing the principles set out in the guidance.
The policy concludes of the culture of renumeration: "Turning
the tide will take courage and leadership from both the
non-executive directors who determine remuneration and the
executive directors who receive it. . . We will work
collaboratively and in particular support companies who take risks
and model a different way of doing things."
Last year, the secretary of the Church of the EIAG, Edward
Mason, said that there was a "systemic problem" of excessive pay
for company executives (
News, 3 February, 2012). In 2011, the Commissioners and
Pensions Board of the Church of England supported only about 35 per
cent of remuneration reports in the UK companies in which they have