G20 Recommendations: Anil Bhanot, General Secretary, Hindu Council – UK
Posted by peacedevelopmentnetwork on April 10, 2009
Interfaith Meeting HOC committee room 14 on G20 – 2 April 09
I would like to just focus on the need to reorganise our financial structures and institutions and offer some practical suggestions. We are all now aware how the banks were allowed to become so powerful that political power or the democratic rule of governance dwarfed in comparison. The financial institutions led the politicians and by how much ever the politicians tried to bail the banking system out of crisis it seemed never enough. Only a few weeks ago the Governor of the Bank of England warned the Government not to extend their borrowings to a far bigger level than the size of our economy so that the country itself will find itself in the sorry situation that it won’t be able to pay back its borrowing, just as some of the banks could no longer afford to pay back their depositors.
So this power of money that can make the world go round cannot be underestimated. It is actually a positive power that is going to unite us more by making the world go round but only if and when we can harness it’s power properly. Free market economies are necessary to help create wealth but things go wrong when that freedom comes on the expense of the weaker or the poorer elements in society. Then that freedom is actually stealing and it is stealing through legal means. This is how the financial institutions became above the law and therefore more powerful than our governments.
We have heard a lot about One God form various speakers and Hindus too have only one God, Brahm. But due to its antiquity we have several incarnations and various aspects of God, not least the female. We have the Goddess of wealth, Luxmi, whom we pray for prosperity and comforts but ancient Hindus quite cleverly, I think, ordained that when Luxmi is pleased with you she sends the fortune riding on the back of an owl. The interesting thing is that an owl is a nocturnal animal, which cannot see in the day light, meaning that money can blind you if you are not careful.
Of course this is where morals come into play, our business ethics. But these only work with those of us who have learnt to “own” these ethics or morals as part and parcel of our way of life. For the vast majority of people the temptation to make easy money, legally even though it may be on the expense of others, is too blinding for them to keep up to these morals. If our education, our training, was sufficient to give us all a sense of responsibility for our fellow beings to the extent that we all would question the fairness of our earnings then clearly there won’t be any problem But that will never happen. The ancient Hindu wisdom of money coming over the back of an owl is an eternal enigma we have to find solutions for.
So how do we make sure that we have an additional guide to help us when we are being blinded by money? You have probably heard the word far too often by now and it is regulation. We need now a three tier regulation system. There is nothing wrong with money or capitalism or free markets but we need to have systems to ward off the money’s blinding effects.
Most of the G20 countries have like the UK a Financial Services Authority, the FSA, which regulates large institutions in each country. This system of regulation works at the middle tier. And in the UK we had additionally a regulatory regime at the more ground level, which was set up after the last recession of the early 1990’s and that was through institutions like the Council of Mortgage Lenders, the CML. The CML regulated the brokers at the ground level so that home lending remained within the confines of business ethics. But as soon as the powers of the CML were eroded we started seeing mortgage lending going through the roof, bearing no relation to peoples earnings. We saw Northern Rock offering loans on the expense of ordinary savers, many of them pensioners, who now get a zero % interest on their earnings. Of course the more the Bank managers lent the higher their bonus. This was exactly the same scenario in the 1990 recession. We learnt then to install regulation through the CML but the Government took away its powers when the banks told the Government that it is somehow restricting growth in the country. It seems to me that the bankers were talking more about their bonuses than the growth of the economy. Regulation was made a dirty word and now the poor and the vulnerable in our society our paying the price, not those bankers, certainly not Sir Fred Goodwin with his £700,000 pension.
I believe if we had kept the regulation at the ground level through institutions like the CML and we have the FSA at the middle level the UK would have been in a lesser mess. Nonetheless we would still be in a mess because there is no regulatory regime on financial and other trade between countries. This is where the free markets really mean the larger economies having an unfair advantage over the weaker economies. In our case it was the US, the subprime lending came from the US, the UK then had to trade likewise just to keep up with the US. The banks are now internationalised, we do not have domestic banks. Money flows through international branches at a colossal level with electronic speed. There is now talk of the need for an international regime of financial regulation and I hope the G20 will be courageous enough to develop a fair and robust system, not only for financial instruments but over what we call free trade also. There is a need for a top level international regulatory syste.
As religious leaders we have to learn to accept that to talk of morals and ethics is we will be accused of being “judgemental”, that is if we are not prepared to translate those morals into systems that can protect the weak and the poor. We must continue to ask more regulation, that would be my moral view, and yes of course nobody likes over regulation and its best mode is self regulation but with money there will always be a blinding effect that needs a guiding hand and for that we do need a three tier regulatory regime, at an international top tier, a national middle tier for the large financial institutions, and another ground level tier at the delivery point dealing with the ordinary people. Just as the banks were allowed to become too powerful the FSA should not be allowed the same fate of regulating financial services at every level. Let FSA regulate the larger institutions but give powers back to institutions like the CML to regulate at the delivery point for the ordinary people at the ground level.
So I suggest a three tier regulatory regime to avoid a similar financial crisis in future and remember this is the second time, after the early 1990’s recession.
Hindu Council UK