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Further inquiry and action needed on banks and tax havens Further inquiry and action needed on banks and tax havens
(5 months later)
Your editorial comments (13 April) were well made. There are a number of areas that urgently need to be addressed. First, how is it that none of these banking issues appear to have been identified by the auditors, in their "going concern" assessments. Is it reasonable to expect regulators to know more about what is going on inside an organisation than an auditor? Regulators can help protect consumer interests through pricing regulation but, if they are really involved with detailed internal process assessment, what are the auditors doing? Perhaps the auditing function should also have a formal responsibility to customers, as well as to shareholders.Your editorial comments (13 April) were well made. There are a number of areas that urgently need to be addressed. First, how is it that none of these banking issues appear to have been identified by the auditors, in their "going concern" assessments. Is it reasonable to expect regulators to know more about what is going on inside an organisation than an auditor? Regulators can help protect consumer interests through pricing regulation but, if they are really involved with detailed internal process assessment, what are the auditors doing? Perhaps the auditing function should also have a formal responsibility to customers, as well as to shareholders.
Second, there is scope for a major investigation into how banks actually add value to society. In essence, the sectors' profits and bonuses are ultimately paid for by their customers.Second, there is scope for a major investigation into how banks actually add value to society. In essence, the sectors' profits and bonuses are ultimately paid for by their customers.
Third, there is a need to investigate the extent to which "selling" is, almost by definition, unprofessional. The concept of being professional should mean that the interests of the customer/client come first. Where the seller operates within an incentive structure that benefits both the seller and others in their organisation, the net result will almost inevitably be defined as mis-selling.Third, there is a need to investigate the extent to which "selling" is, almost by definition, unprofessional. The concept of being professional should mean that the interests of the customer/client come first. Where the seller operates within an incentive structure that benefits both the seller and others in their organisation, the net result will almost inevitably be defined as mis-selling.
The horrific consequences that have arisen in such areas as PPI etc, probably also apply to much of the pay-day loan industry, as well as a significant part of international lending. A major inquiry into the nature and future of the finance sector is long overdue, but there are also many important questions urgently in need of further research.
Emeritus professor Bruce Lloyd
South Bank University		The horrific consequences that have arisen in such areas as PPI etc, probably also apply to much of the pay-day loan industry, as well as a significant part of international lending. A major inquiry into the nature and future of the finance sector is long overdue, but there are also many important questions urgently in need of further research.
Emeritus professor Bruce Lloyd
South Bank University
• It is obvious many of the top executives of the failed banks had no actual financial expertise; they are like someone pretending to be a doctor, or a fake architect whose buildings collapse, guilty of misrepresentation. The regulator may be surprised no bank bosses have faced charges – we all are.
Tony Cheney
Ipswich, Suffolk 		• It is obvious many of the top executives of the failed banks had no actual financial expertise; they are like someone pretending to be a doctor, or a fake architect whose buildings collapse, guilty of misrepresentation. The regulator may be surprised no bank bosses have faced charges – we all are.
Tony Cheney
Ipswich, Suffolk
• As a research and advocacy group that has for years called attention to the murky world of tax havens, we welcome your report (Leaks reveal secrets of the rich who hide cash offshore, 4 April). But you should also have dispelled the myth advocated by some proponents that tax havens promote greater tax efficiency through competition; the evidence in economic literature is scanty at best. What is clear is that this benefit has not been enough to prevent tax havens from going bankrupt.• As a research and advocacy group that has for years called attention to the murky world of tax havens, we welcome your report (Leaks reveal secrets of the rich who hide cash offshore, 4 April). But you should also have dispelled the myth advocated by some proponents that tax havens promote greater tax efficiency through competition; the evidence in economic literature is scanty at best. What is clear is that this benefit has not been enough to prevent tax havens from going bankrupt.
In September 2009, the Cayman Islands, one of the largest, faced bankruptcy and was unable to pay its government employees. Britain, which oversees the territory, was forced to bail out the Cayman authorities. Recently, Cyprus went belly up and had to be rescued by the EU, ECB, and IMF.In September 2009, the Cayman Islands, one of the largest, faced bankruptcy and was unable to pay its government employees. Britain, which oversees the territory, was forced to bail out the Cayman authorities. Recently, Cyprus went belly up and had to be rescued by the EU, ECB, and IMF.
Investors need to realise that the lack of prudential regulations and oversight allows tax havens to pass on the cost-savings to them as higher returns. But with higher returns come higher risks. They implicitly accepted those risks when they invested in tax havens. In the event the financial risks pile up – as they inevitably must – and the house of cards comes crashing down, investors should not expect taxpayers to foot the bill.
Dev Kar
Lead economist, Global Financial Integrity, Washington DC		Investors need to realise that the lack of prudential regulations and oversight allows tax havens to pass on the cost-savings to them as higher returns. But with higher returns come higher risks. They implicitly accepted those risks when they invested in tax havens. In the event the financial risks pile up – as they inevitably must – and the house of cards comes crashing down, investors should not expect taxpayers to foot the bill.
Dev Kar
Lead economist, Global Financial Integrity, Washington DC
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