Swiss banks as a model for financial regulation?
Political leaders around the world are trying to restrict banking bonuses given for short-term gains, which encourage the kind of reckless risk-taking that helped trigger the recession. And in a strange twist, the National Post says that to develop tougher regulations, everyone should look to Swiss banks — more commonly associated with allegations of fraud ...
European leaders are starting to follow suit; Britain’s five largest banks have agreed to publish the pay of their key staff members, and will spread bonus payments over three years. French president Sarkozy has announced a set of even tougher and more broadly applied regulations.
Of course, not everyone thinks that bonus reforms are the way to go. Nobel prize-winning conomist Robert F. Engle III says
We shouldn’t ban bonuses, but restructure the way they’re paid so they’re more commensurate with the risk the company is taking….What’s important is we give the banking system the right incentives to figure this out. When companies get too big and too complex to fail, they would face a higher tax rate, which would go into a rescue fund. The banks are not excited about it, they would rather go back to business as usual."