Wednesday 29 August 2012
IMA: structural reform key to culture change in banking
The Investment Management Association (IMA) attributes the financial crisis and recent banking scandals to changes in banking structure and incentives over the last forty years, stating that cultural reform cannot properly be addressed without looking at these two areas.
In its submission to the Parliamentary Commission on Banking Standards, the trade body - which represents the asset management industry in the UK – points out that underlying incentive structures, which often result in large pay-outs, encourage traders and executives to take more risk and focus on short-term profit as opposed to prudent management and the long term return on assets.
The IMA also highlights concerns over interest rate swap sales and believes the Government should review its decision not to follow all of Vickers’ proposals in preventing derivatives selling by retail banks.
Liz Murrall, IMA’s Director of Corporate Governance and Reporting, said:
“Structural reform, rather than cultural reform, should be a fundamental focus along with the underlying incentives in banks. We previously supported the Independent Commission on Banking’s recommendation about which activities should be outside the ring fence, and would encourage Government to review its decision not to follow Vickers’ proposals in full.
“Moreover, in any final recommendations, it is important to consider any potential negative impact on the UK’s leading position in the international financial services industry and on credit provision to the economy.”
IMA’s full response to the Parliamentary Commission on Banking Standards
For further information please contact:
Mona Patel, Head of Communications
020 7831 0898 or 07834 089332
Navdeep Sidhu, Press Officer
020 7831 0898 or 07843 517618
Christina Bridge, Press Assistant
020 7831 0898
About the Investment Management Association
- The IMA is the trade body for the UK's £3.9 trillion asset management industry (retail and institutional) which is one of the world's leading investment management centres.
- Our role is to represent the interests of the asset management industry to government and regulators both in the UK and internationally.
- The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.