This came from the HSBC Chairman's statement this morning:
The recent disclosures around unacceptable historical practices and behaviour within the Swiss private bank remind us of how much there still is to do and how far society's expectations have changed in terms of banks' responsibilities. They are also a reminder of the need for constant vigilance over the effectiveness of our controls and the imperative to embed a robust and ethical compliance culture.
He's wrong.
Scoiety's expectations of banks have not changed. We have always expected them to be honest.
What's changed is that society has become aware that bankers have not matched up to that rather basic expectation.
And the problem is bankers still cannot face up to the basic facts.
When they do we might get change. Until then they must remain on parole.
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Regulation and more severe penalties will not change the banker’s moral compass. Whilst they remain in the positions they are in they will merely search for ways not to get caught.
Criminal prosecutions – of individual bankers, not of banks – would change their behaviour.
There is a big difference between complete impunity and merely light penalties. Where there is not complete impunity, tougher sentences aren’t very effective as a deterrent, because people who’ve considered the consequences usually decide it’s not worth breaking the law, and the criminals are people who assume they won’t be caught. But where there is no chance at all of being prosecuted, many people will persuade themselves that it is OK to break the law. Especially if everybody around them seems to be doing it. Especially if that gives them an advantage in going for the large financial rewards on offer. Other people won’t do that, but then they may not get very far in banking.
Applying the criminal law to bankers could improve bankers’ moral compass, either by making bankers more ethical, or by making banking more attractive to people with morals.
I worked in around the City over many years and watched the steady shift/decay of ethics and values. We now have a generation of middle and senior management who know no better. As Fink said, ‘everyone is doing it’, so they think they are ok.
It’s going to take time but it needs very different people, many from outside the sector, to be brought in as regulators, directors and managers. And if they don’t understand the business, the business has to change until they do. If it’s that complex it’s probably shady.
I think Adair Turner has made similar comments. Difficult when the pool from which directors are fished is so polluted. In the old days lhe Bank of England used to play a semi-formal role in judging what and who was acceptable. That might be part of the solution.