In spite of the agreement, things could still go terribly wrong

By Nesrine Malik

Despite the ten pound note waving antics of city workers, there is a palpable feeling in the City (and by ‘City’, I mean the wider community of the financial industry and not just the Square Mile), that people are angry and, surprisingly to some, many believe it is with good cause.

The divide is less stark than the media would like to make out. Private-public boundaries are being redefined and the challenge the G20 leaders face is effectively to negotiate the logistics and legislation of this new system. Tax payers for example, are emboldened in their belief that they are now majority owners of several major banks and feel entitled to comment and judge the actions and remuneration schemes of these institutions and the government representatives on their boards.

This gallery is a tempting one for legislators to play to and an intimidating one to ignore. To give in to pressure and enforce popular laws regarding bonuses could alienate financial services professionals who are ultimately self-interested parties, drive talent elsewhere or simply force practices underground, while being too timid with new legislation will only further reinforce the image of governments in cahoots with the Masters of the Universe clique.

While there is resentment regarding the interference of those who are perceived as ‘laymen’ in the workings of sophisticated institutions, many in the City are indeed open to change, as long as it is systemic and not for vindictive or scapegoating purposes. Few are ideologically passionate about capitalism as an ideology and there is a window of opportunity here that must not be wasted.

The financial sector as a whole is more willing to rehabilitate a badly damaged image and preserve whatever little vital autonomy it needs to survive. Many industries could do with more regulation and tax havens with more transparency and indeed, the private equity industry, historically one of the most secretive, has come a long way in the past five years with such initiatives as the Guidelines Monitoring Group. But the nihilists would have us raze the entire political and economic system to the ground and start anew.

As this is clearly not a viable alternative a good place to start is to establish some basic principles. Taxpayers are not shareholders of bailed out institutions, governments are regulators not bankers, and bankers report to their shareholders and not the electorate.

The pulley system of pressure within that triumvirate is where things could go terribly wrong.