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It is more about ethics than policing

So the FSA is going to beef up on its staff in the oversight of the banks. As I see it, this approached is doomed before it even starts. The regulator, whether it is the FSA or any other, cannot match both the expertise and the innovativeness of the staff in the banks. The reason for this is simple. The regulator cannot compete with the banks in terms of direct payments, like salaries, or other incentives like bonuses.

This gets the whole issue back to what got the financial industry into this mess in the first place. 

Putting more overseers in to monitor what is going on is also of doubtful value. It is an approach that will only lead to lulling everybody back into a false sense of security (again). This will last only until the next crisis emerges.

The real solution lies with bank managements accepting, in all sincerity, that they do have a real obligation to abide by certain ethical standards (and bankers in their position of trust within the community should know all about this) and that profits are not the only game in town.

If they can't get this right then no amount of new rules or new inspectors are going to make any difference.

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Bryan Foss
Bryan Foss - Bristol Business School - London 22 March, 2010, 08:24Be the first to give this comment the thumbs up 0 likes

Absolutely agree - this issue is about ethics and no amount of expensive (funded by the consumer it aims to protect) regulation will be enough to counter the effects of boards with objectives that are misaligned from their stakeholders (whether customers, investors, employees, suppliers, partners or regulators).

As an NED I have a responsibility to represent all these stakeholders at different times and the ethical challenge makes sense on the board and in leading and being a member of the key assurance committees (Audit, Risk, Nominations and Remuneration for example).

There is some excellent work being done in this area, but so far with insufficient impact on the big banks, or even on the government or FSA as regulator. Too many 'same olds' are moved around or called back in so that things don't really change at all - just look at the FSA and UKFI, if you can find the key names or how the appointment process is supposedly 'transparent'.

One person who is starting to influence these boards and to shake things up with the various regulators (wider than the FSA) is Prof. Roger Steare, Corporate Philosopher with CASS (City University Business School).

Watch his short (less than 4 minute) video at: http://www.youtube.com/watch?v=unufsY1HZh8

There is much more to be done, but we may now be at, or very close to, the tipping point where ethics really count - and there are more than a few people ready to give a final push .......

 

Stanley Epstein

Stanley Epstein

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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