Friday, 01 April 2016 01:56

Chancellor Signals No Confidence in Board Governance of UK Lenders

With the move to target Buy to Let mortgages for increased regulation, George Osborne is lining up a nice new excuse for his own failings. What he is also doing is signalling that the Boards of some of the UK's biggest financial companies just aren't competent, aren't up to the job.

He is essentially telling the boards they can't to be trusted to run their own companies, and that someone needs to hold their hands - The Bank of England. He's also signalling to shareholders and investors that they need to be more concerned about the Governance of their companies. The board can manage the small stuff, but the big stuff belongs to Government.

To come to the conclusions he has, George would need to think that the boards of these companies either don't have their own models, are totally reckless in overriding their own lending models or they don't have the ability to build sufficient models.

Remember that HBOS had Non Executives that highlighted what was coming in the build up to 2008. The problem was that people didn't listen. There is also the fundamental principle of private enterprise in that investors and shareholders who don't exercise good governance using the companies act, actually deserve to lose their investments. What is wrong with businesses failing? If a lender is involved in using public money, money from savers and is over leveraged then tell them to stop and do so on an individual basis.  

Why should totally private lenders not be allowed to take risks and indeed fail?

The Chancellor is playing a very dangerous game in challenging private boardrooms. Boards want to run their own businesses, not to have the Government run it for them. As we can all see, someone who is running a £100bn a year loss, should not be giving out any lessons to anyone on financial good governance.

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