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Screenshot of a breaking news alert e-mail from Q2 2017
Private investors and professional traders within institutional firms in Britain have become considerably more conservative in their approach toward risk ever since the speculation and debt-based economy’s house of cards collapsed in 2008, resulting in the nationalization of many of the nation’s large banks, and the financial ruin of thousands of investors.
At that particular time, there was an absence of metaphorical finger-pointing, and many key personnel which led these institutions to failure were indeed rewarded with large bonuses before heading for the hills for a life of luxury in retirement.
As if this was not enough to irk both investors who faced irreparable fiscal damage and taxpayers who now found themselves saddled with the cost of propping up ailing financial institutions, some of the largest banks in the United Kingdom found themselves embroiled in the ongoing high-profile investigation into the allegations that they have been manipulating FX rates.
The regulatory backlash that ensued has included international class action lawsuits against some of the world’s largest FX dealers, and a government level investigation led by Lord Grabiner in conjunction with law enforcement agencies across the pond in North America, in which the Federal Bureau of Investigation (FBI) has been operating in order to enforce criminal jurisdiction over those concerned.
Today, one British peer, Sir David Walker, has taken a different stance and has controversially stated that the foreign exchange market needs “fine tuning” rather than heavy handed reform.
Sir David is the incumbent Chairman of Barclays, and considers that the current drive toward stringent regulation in the FX market could potentially damage the industry.
He explained yesterday that whilst the FX market is “vulnerable to taint” it had worked very well for a long time and the focus should now be on ensuring better conduct by traders.
Barclays is one of the large FX dealers which is very much embroiled in the investigation which now comprises of 15 different authorities with regard to FX manipulation.
Sceptics and industry experts are likely to be hard to convince that softer regulation is required following the financial crisis 7 years ago, followed by the LIBOR rate fixing scandal perpetrated by employees of large banks, combined with the current FX rate manipulation allegations.
LeapRate recently reported that the most recent example of government officials’ attention being attracted by Barclays is in the form of a lawsuit by New York Attorney General Eric Schneiderman, alleging that Barclays created false marketing information which targeted institutional investors relating to its dark liquidity pool.
Sir David explained that it was “wholly appropriate” that regulators now look at the FX market and that some oversight may be needed, but that it was important not to “spoil” a market that worked effectively for most clients.
He acknowledged that the “animus” against banks was not going to go away soon, arguing that the current environment meant that banks were being treated as guilty until they proved themselves innocent.
One measure that the bank is taking in order to ensure self-governance and ethics within the institution, in line with Sir David’s opinion that overbearing regulation can be mitigated by good corporate governance, is to establish a Compliance Career Academy in partnership with Cambridge University in order to improve the training of staff responsible for compliance.
In keeping with the somewhat Orwellian culture that has engulfed the British financial services industry, the academics at Cambridge Judge Business School, led by Dame Sandra Dawson who sat on the Barclays board for six years until 2009, will train Barclays staff on subjects such as truthfulness and “what is compliance?”
Sir David considers the training essential to ensure that compliance staff could go a step further and mentor traders and other colleagues to improve culture and behavior.
“Compliance has not been seen as a serious enough specialist activity,” Sir David said. “Our track record in culture has not been good. It’s important for us all to have a concept of culture, conduct and compliance.”
“One way of seeing it is that we are guilty until we prove ourselves to be innocent” he opined.
Further defending his view that regulatory authorities should allow firms to be responsible internally for the ethics of their key staff as opposed to strong arm tactics by regulators, Sir David stated at an event to announce the compliance academy. “I’m sorry to say that there will be accidents from time to time.”
“They are not evidence of the failure of what we are rolling out. They are indicative that it takes time. We always have been very clear some of this stuff will take 5-10 years.”