UK: Prime Minister Gordon Brown calls on rest of world to back similar types of bank bailouts

Record ID: 566420

  • Title: UK: Prime Minister Gordon Brown calls on rest of world to back similar types of bank bailouts
  • Date: 14th October 2008
  • Summary: (W3) LONDON, ENGLAND, UNITED KINGDOM (OCTOBER 13, 2008) (REUTERS) BRITISH PRIME MINISTER GORDON BROWN, GETTING OUT OF CAR AND BEING GREETED BY NIALL FITZGERALD, CHAIRMAN OF THOMSON REUTERS BROWN WALKS INTO REUTERS OFFICE AND IS GREETED BY STAFF BROWN POSES FOR PHOTOS WITH REUTERS STAFF BROWN WALKS TO PODIUM FOR SPEECH AUDIENCE OF BUSINESS LEADERS AND JOURNALISTS LISTENING BROWN AT PODIUM
  • Embargoed: 29th October 2008 12:00
  • Keywords:
  • Topics: Finance,Domestic Politics
  • Reuters ID: LVADZOOZQD6X7AQ5IJWFZ1D57SDW
  • Story Text: British Prime Minister Gordon Brown on Monday (October 13) urged other governments to follow the U.K's bank bailout plan to kick start credit lending and boost the economy.
    Britain has waded in with 37 billion pounds ($64 billion U.S. dollars) of taxpayers' cash to bail out three major banks, in a move that could make the government their main shareholder.
    The measures are being echoed across Europe as countries try to adopt a common approach to avoid a meltdown in the financial system and its knock-on effects on the global economy.
    "We must now reform and renew the international financial system and we should do it around the agreed principles that are shared by every country, of transparency, integrity, responsibility, good housekeeping and co-operation across borders," Brown said during a speech at Thomson Reuters offices in London's Canary Wharf.
    "What I think we have got to realise is that unless we build a global system of cooperation and supervision then we are as likely to have another crisis that starts somewhere else that we didn't understand was happening because we had no idea of the risks that people were taking, so I think it is actually a new relationship between markets and government that we are looking for," Brown said.
    In return for the government money, the banks being helped by the government will be forced to curtail the bonuses that many believe encouraged a risk-taking culture that precipitated the global financial crisis. They will also have to scrap dividends.
    Asked how the bonus culture can be justified during these times, Brown said there has to be some kind of perks for bankers who take calculated healthy risks.
    "The question for the country is what are the right measures that you take reward work and hard work and effort and enterprise and responsible risk-taking rather than irresponsible risk-taking?" Brown said.
    "There are a series of measures designed to restore trust in the financial system and if you like to build around these rules, you reward work, effort and enterprise but not irresponsibility and I think that's where the public would want us to be and that's a fair basis on which to move forward to the future," he added.
    Bankers, analysts and advisers who came to listen to Brown speak, were generally encouraged by the bank bailout plan, and stressed it is vital for other countries to now follow suit.
    "It's more than a step in the right direction. It's very positive and we just need to see some real commitment by the other countries to come in behind and do the same thing," said Managing Director of ANZ Bank, Tim L'Estrange.
    But, David Ankerson, Managing Director of Incite Management Consulting, foresees trouble ahead with some banks being forced to curtail bonuses and others free to do what they like.
    "I think there are going to be issues around remuneration. For banks that are being capped versus the banks that aren't. I mean I think a lot of the senior guys right now might be queuing up outside HSBC's offices because they could take the pick of the talent, so I think there's some issues there," he said.
    Brown said he believes Britain is leading the way resolving the global meltdown. He called upon City executives to draw upon the same courage and foresight their predecessors had shown when drawing up the Bretton Woods post-war financial order in the 1940s.
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