BANKS need more non-executive directors who can understand the balance sheet and who can stand up to executives, Paul Tucker said yesterday.
The outgoing Bank of England deputy governor told MPs that regulators imposing new rules on banks’ managers and monitoring activity more closely is not enough to stop the sector getting into trouble again, and that boards need beefing up to do their bit.
“The idea that there is just bank supervisors and bank management is a recipe for a nightmare,” he told the Treasury Select Committee. “The boards have to step up and do their job, they have to be able to know when they are being bulls*****d.”
He also called for a structural change to increase the powers of the chairmen of big banks, giving them the staff and an office to find information on the bank’s activities without having to go through chief executives.
“My priority right now is to get people onto boards of banks who can read the bank’s balance sheet and assess the strength of the banks,” Tucker said in his last hearing in parliament before stepping down from the role.
The deputy governor added that clearing houses could present the next big problem in the financial system, saying they have become “too important to fail” because political leaders and regulators have given them more power.
Increasing volumes of derivatives and other trades now have to go through central counterparties, making interconnections between banks clearer but also placing more pressure on the clearing houses themselves.
And Tucker said it is wrong to place too much focus on a specific set of rules and regulations.
He told MPs the authorities must not become tied to a set of ticked boxed and instead be aware of the wider position of banks and the sector as a whole.